Elastic N.V. (NYSE:ESTC) came out with its third-quarter results last week, and we wanted to see how the business is performing and what top analysts think of the company following this report. Revenues were a bright spot, with US$113m in sales arriving 5.4% ahead of expectations, although statutory earnings didn't fare nearly so well, recording a loss of US$0.55, some 2.9% below consensus predictions. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
Following the latest results, Elastic's ten analysts are now forecasting revenues of US$578.2m in 2021. This would be a sizeable 50% improvement in sales compared to the last 12 months. The loss per share is expected to ameliorate slightly, reducing to US$2.34 on a statutory basis. Before this earnings announcement, analysts had been forecasting revenues of US$567.9m and losses of US$2.25 per share in 2021. Although the revenue estimates have not really changed, we can see there's been a earnings per share expectations, suggesting that analysts have become more bullish after the latest result.
As a result, there was no major change to the consensus price target of US$96.00, with analysts implicitly confirming that the business looks to be performing in line with expectations, despite higher forecast losses. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Elastic analyst has a price target of US$130 per share, while the most pessimistic values it at US$82.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Elastic shareholders.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Elastic's past performance and to peers in the same market. We can infer from the latest estimates that analysts are expecting a continuation of Elastic's historical trends, as next year's forecast 50% revenue growth is roughly in line with 45% annual revenue growth over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 12% per year. So it's pretty clear that Elastic is forecast to grow substantially faster than its market.
The Bottom Line
The most obvious conclusion is that analysts made no changes to their forecasts for a loss next year. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for Elastic going out to 2022, and you can see them free on our platform here.
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