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Elastic Idea Proposal (ESTC)

Elastic Idea Proposal (ESTC)
 

Will Elastic continue its impressive growth or will competition from Amazon and others slow it down?

Report Available: February 5, 2020

 

Blueshift’s initial research found demand for ESTC’s search and monitoring software growing rapidly, though a deceleration in billings growth during the most recent quarter has caused some worry among investors. ESTC is working to improve its premium features to differentiate itself from the free software offered by AMZN, as well as from a host of other vendors in a dynamic but competitive market.

Observations

  1. ESTC’s revenue climbed 59% to $101 million for its fiscal Q2, which ended Oct. 31. The company added more than 1,000 paying customers from the prior quarter – including 50 new customers with a total contract value above $100,000 – to bring its total subscription count to more than 9,700. Its net expansion rate topped 130% again, an indication that existing customers are spending more with ESTC. For its full fiscal year ending April 2020, ESTC is forecasting about $415 million in revenue, which would represent 53% growth from fiscal 2019 after a 70% increase the prior year. ESTC is benefiting from increased interest in app monitoring, data logging, and enterprise search capabilities. Shares of the company, however, took their first big fall since ESTC’s 2018 IPO following the company’s latest earnings report, presumably because of deceleration in billings growth.
  2. ESTC develops software for storing, searching, and analyzing data in a single stack of technologies. Its biggest customers include UBER, WBA’s Walgreens and MTCH’s Tinder. Earlier this month, the company released version 7.5 of its Elastic Stack, offering improvements to its observability, security, and enterprise search solutions. The latest release also included the launch of Kibana Lens, marketed as a lightning quick way to develop visualizations from data. ESTC offers a free download of its open-source software stack but charges for advanced features. A subscription to its Site Search Service, for example, starts at $79 per month.
  3. AMZN’s Elasticsearch Service provides similar functionality to ESTC’s core platform, as it is based on the same open-source stack. AMZN offers the software for free and has the advantage of an easy connection to a company’s AWS cloud deployment. AMZN does not offer a paid version with premium features or support, as ESTC does, but it announced a new “UltraWarm” storage tier this month that it says will save AWS customers money by moving infrequently accessed data to a cheaper storage service.
  4. Other competitors in the enterprise search and app performance monitoring space include SPLK, NEWR and DDOG. In October, SPLK closed its $1 billion acquisition of SignalFX, beefing up its cloud monitoring capabilities. DDOG, which recently announced new security monitoring features and an integration with MSFT’s Azure DevOps, reported an 88% surge in revenues during Q3, its first as a public company following its September IPO.

 

How do customers feel about ESTC’s capabilities? Does a paid subscription to ESTC offer good value over the free version? Will AMZN’s rival software gain market share from ESTC? How will competitors like SPLK and DDOG affect ESTC’s growth? What features and capabilities are the key to ESTC’s future growth? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Elastic customers, Elastic partners, Competitor customers, and Industry specialists.  

 

Companies: Elastic N.V. (ESTC), Amazon.com Inc. (AMZN), Data Dog Inc. (DDOG), New Relic Inc. (NEWR), Splunk Inc. (SPLK)

 

Research Begins: January 20, 2020

 

To see other ideas Blueshift Research is currently working on, please click here.

 

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