William Blair initiated research coverage of Elastic N.V. (ESTC $82.73), a provider of observability, enterprise search, and security solutions.
Analyst Kamil Mielczarek estimated the company would generate revenue of $853.9 million in fiscal 2022 (ending April), $1,078.1 million in fiscal 2023, and $1,367.7 million in fiscal 2024.
“Elastic was built on top of an open-source search engine called Elasticsearch,” Mielczarek said, “which over time integrated with Logstash and Kibana to form the ELK Stack. Elastic leveraged these tools to develop a best-in-class search and analytics platform, which the company monetizes through three core solutions: observability, enterprise search, and security. We estimate that since 2013, Elastic’s free and paid products have been downloaded close to 500 million times. Originally an on-premises offering, Elastic is making strong progress transitioning to the cloud. Cloud should over time accelerate the pace at which customers adopt the Elastic platform, and the company’s hybrid offering positions it well to address the needs of more complex hybrid enterprise customers.”
Mielczarek continued, “We peg Elastic’s addressable market at about $44 billion, with less than 2% penetration for Elastic. In observability, the market is still largely greenfield, where many companies use either legacy or internally built solutions, or do not have an existing product. The greenfield opportunity, combined with an expected TAM growth rate of at least midteens, leaves Elastic significant opportunity to continue to grow before it will be meaningfully affected by competitive pressures. The market growth should be driven by multiple decade-long secular tailwinds, including increasingly sophisticated security risks, the digitization of businesses, transition to complex multicloud architectures, growth in data, and development of new applications.”
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Outperform (Buy): 76%
Market Perform (Hold): 23%
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Outperform (Buy): 26%
Market Perform (Hold): 6%
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