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Elastic is a $5.5 billion big-data analytics provider that does the heavy lifting of searching for "dark data" that companies need to gather and process.
I borrowed the phrase "dark data" from Splunk, another heavy duty data-engine you've probably heard of, because it describes the flood of log files and other digital data that companies must collect and harness. But first they must find, clean, and prep it before they can use it to model any business processes and gain insights from them.
Elastic's primary product/service is Elastic Stack, a set of software applications that ingest and store data from various sources and formats, as well as perform search, analysis and visualization functions.
The company is growing sales at 50% this fiscal year (ends next April) to breach the $400 million mark. The average Street price target is now $107, with BofA/ML moving to $137, after a solid Q1 2020 (ended July).
Elastic reported strong results with total revenue coming in at $89.7 million, exceeding consensus by $6.2 million, on 58% growth. Subscription revenue growth was 59.6% y-o-y vs. 59.4% last quarter. Net revenue retention was above 130% for the 11th consecutive quarter on broad-based customer expands.
KeyBanc raised estimates and reiterated their Overweight rating with a $110 PT citing "a compelling growth opportunity driven by an expanding number of use cases in security, log management, search, and monitoring."
Most covering i-banks raised their estimates on 8/29 after the report. Consensus revenue now stands at $410M for the year, for 51% growth. That's better growth than Atlassian or Coupa (29-43%) at a Price-to-Sales valuation of 13X (closer to TEAM's 9X than COUP's 20X).
Now ESTC is a Zacks #1 Rank (Strong Buy) as estimates have risen again.
In September, we took a stake in ESTC near $85 for my TAZR Trader group and rode it up into the mid-$90s. But then the Software sector valuation correction resumed and we let it go.
Now at $70, the stock offers unique value among young data-engine software companies like Splunk and Alteryx trading at just 10X next year's consensus estimate of $550 million.
Here are some other strong growth metrics from last quarter...
**Total subscription customer count over 8.8K (from 8.1K in Q4)
**Total customer count with ACV greater than $100K over 475 (from 440 Q4)
**Subscription revenue represented 92% of total revenue
**New wins and expansions included: TomTom, U.S. Navy, Freddie Mac, and NVIDIA.
Elastic launches Elasticsearch service on Microsoft Azure
Elastic also announced the launch of Elasticsearch Service on Microsoft's Azure for its managed service users who want more cloud provider options. Organizations that have standardized on Azure will now be able to enjoy the convenience of a fully managed Elasticsearch service on their preferred cloud platform.
This is an important partnership given that Elastic competes with Amazon AWS on these services.
Here's how Barclays addressed it in late June when shares were shares were finding support in the low $70s...
Analyst Raimo Lenschow believes the bear thesis for Elastic around competition from Amazon Web Services Open Distro is overblown. The features released by AWS will likely help it convert a share of the millions of free users onto its platform, but Elastic focuses on large scale deployments, Lenschow told investors in a research note. This is where Elastic will continue to generate the vast majority of its sales growth, says the analyst. He believes the company's runway of growth with enterprises is unaffected by Open Distro and encourages long-term investors to buy into the recent share weakness caused by the lockup expiry. Lenschow reiterated an Overweight rating on Elastic with a $108 price target.
iRobotbecame a Zacks #5 Rank (Strong Sell) in late July at $75 after a disappointing Q2 report propelled Wall Street analysts to lower growth estimates.
My colleague Ben Rains published an article on July 31 describing the growth slide...
Quick Q2 Recap
The Bedford, Massachusetts-based company posted earnings of $0.25 a share. This crushed our $0.03 a share Zacks Consensus Estimate, but it did mark a significant downturn from the year-ago period’s EPS of $0.37. Meanwhile, iRobot’s sales climbed roughly 15% to $260.2 million, which fell just short of our projection.
iRobot Overview
The reason for iRobot’s decline stems from the firm’s exposure to the U.S. and China trade war. Last quarter, the robotic vacuum maker said that it would slowly move production of some of its “more easy to build products” outside of China to help fight tariffs worries. Executives claimed that the efforts would help iRobot create better long-term supply chain flexibility.
But Wall Street doesn’t seem satisfied yet. And this disappointment comes with good reason, since the firm lowered its 2019 guidance on the back of trade-related setbacks. “Although we achieved our U.S. revenue target in the second quarter, we believe that the direct and indirect impacts of the ongoing U.S.-China trade war and the recently implemented 25% tariffs are likely to constrain U.S. market segment growth in the second half of the year below our expectations at the start of 2019,” the company wrote in prepared remarks last week.
(end of Ben Rains July 31 excerpt)
Ben went on to elaborate about company guidance that did not paint a compelling picture, and literally only compelled analysts to revise their models downward.
iRobot executives lowered their revenue outlook from between $1.28 billion and $1.31 billion down to the $1.20 to $1.25 billion range. Meanwhile, the company dropped its earnings guidance from between $3.15 to $3.40 a share this year to anywhere between $2.40 and $3.15.
This guidance in July cause the Zacks Consensus EPS Estimate for the firm’s Q3 earnings to tumble over 48% to $0.58 per share on the back of a 1.4% sales decline that would see it hit $260.8 million. The company’s full-year fiscal 2019 EPS figure was then projected to fall by a similar 48% to reach $2.73 a share.
Sweeping Up Q3 Results
Before I share what IRBT reported on Tuesday October 22, let me make this perfectly clear...
From late July to October 22, IRBT shares fell over 25% -- from $75 to under $55 -- as estimates came down and the Zacks Rank told you "Don't buy, don't buy!"
And tonight, while they delivered more growth -- and IRBT remained a Zacks #5 Rank because of newly falling estimates before the report -- a decidedly muted outlook for 2020 hit like a brick vacuum.
iRobot reported a giant earnings beat of $1.24 vs $0.54 and 9% growth in Q3 revenues to $289.4 million on strong international performance, surpassing the consensus estimate of $259.4 million, which still represented a year-over-year decline.
Even as revenues declined 7% in the US, this was offset by a 40% growth in Japan and 27% growth in emerging markets/EMEA.
But more importantly, management narrowed its outlook on 2019 revenue and operating income. The company currently expects revenues for the full year in the range of $1.2-1.21 billion and operating income in the range of $75-80 million.
Meanwhile, the guidance on full year EPS was narrowed to $2.60 to 2.80, from the prior estimate of $2.40 to $3.15.
In after-hours trading, as I type this on the evening of October 22, this quarterly report and outlook saw IRBT shares reacting down nearly 18% to $44.
Bottom line:The Zacks Rank warned investors in late July at $75 that more pain was on the horizon for IRBT. This week's results and price action could change that outlook, but the stock -- and analyst models -- will likely need time to heal before it's time to jump back on board. The Zacks Rank will let you know.
Additional content:
Chipotle wows the after market today with Q3 earnings results including same-store sales up 11% year over year. Expectations had been for 9.3% growth year over year. Earnings were well ahead of the Zacks consensus — $3.82 per share easily surpassed the $3.16 analysts had been expecting, on $1.40 billion in revenues, better than the $1.38 billion expected.
Chipotle has put much effort into its Digital platform, and results look to be paying off at this time: up 87.9% from year-ago levels. The Zacks Rank #2 (Buy)-rated company is up 2% on the news in late trading.
Texas Instruments posted mixed results after today’s closing bell, beating on the bottom line — $1.49 per share versus the 41.41 expected — on sales in the quarter of $3.77 billion, which was shy of the $3.81 billion analysts were looking for. Guidance was also lowered for Q4 and full-year 2019, sending shares down 9% in the after-market.
Snap Inc. posted a better-than-expected loss in its Q3 earnings report this afternoon: -4 cents per share, compared to the -5 cents anticipated. Revenues of $446 million outperformed the $438 million analysts had been expecting, with Daily Active Users (DAU) coming in at 210 million — 3 million higher than the consensus estimate.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Elastic, iRobot, Chipotle, Texas Instruments and Snap highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – October 23, 2019 – Zacks Equity Research Shares of Elastic (ESTC - Free Report) as the Bull of the Day, iRobot (IRBT - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Chipotle (CMG - Free Report) , Texas Instruments (TXN - Free Report) and Snap Inc. (SNAP - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Elastic is a $5.5 billion big-data analytics provider that does the heavy lifting of searching for "dark data" that companies need to gather and process.
I borrowed the phrase "dark data" from Splunk, another heavy duty data-engine you've probably heard of, because it describes the flood of log files and other digital data that companies must collect and harness. But first they must find, clean, and prep it before they can use it to model any business processes and gain insights from them.
Elastic's primary product/service is Elastic Stack, a set of software applications that ingest and store data from various sources and formats, as well as perform search, analysis and visualization functions.
The company is growing sales at 50% this fiscal year (ends next April) to breach the $400 million mark. The average Street price target is now $107, with BofA/ML moving to $137, after a solid Q1 2020 (ended July).
Elastic reported strong results with total revenue coming in at $89.7 million, exceeding consensus by $6.2 million, on 58% growth. Subscription revenue growth was 59.6% y-o-y vs. 59.4% last quarter. Net revenue retention was above 130% for the 11th consecutive quarter on broad-based customer expands.
KeyBanc raised estimates and reiterated their Overweight rating with a $110 PT citing "a compelling growth opportunity driven by an expanding number of use cases in security, log management, search, and monitoring."
Most covering i-banks raised their estimates on 8/29 after the report. Consensus revenue now stands at $410M for the year, for 51% growth. That's better growth than Atlassian or Coupa (29-43%) at a Price-to-Sales valuation of 13X (closer to TEAM's 9X than COUP's 20X).
Now ESTC is a Zacks #1 Rank (Strong Buy) as estimates have risen again.
In September, we took a stake in ESTC near $85 for my TAZR Trader group and rode it up into the mid-$90s. But then the Software sector valuation correction resumed and we let it go.
Now at $70, the stock offers unique value among young data-engine software companies like Splunk and Alteryx trading at just 10X next year's consensus estimate of $550 million.
Here are some other strong growth metrics from last quarter...
**Total subscription customer count over 8.8K (from 8.1K in Q4)
**Total customer count with ACV greater than $100K over 475 (from 440 Q4)
**SaaS revenue increased 71% y/y (77% excluding FX)
**Subscription revenue represented 92% of total revenue
**New wins and expansions included: TomTom, U.S. Navy, Freddie Mac, and NVIDIA.
Elastic launches Elasticsearch service on Microsoft Azure
Elastic also announced the launch of Elasticsearch Service on Microsoft's Azure for its managed service users who want more cloud provider options. Organizations that have standardized on Azure will now be able to enjoy the convenience of a fully managed Elasticsearch service on their preferred cloud platform.
This is an important partnership given that Elastic competes with Amazon AWS on these services.
Here's how Barclays addressed it in late June when shares were shares were finding support in the low $70s...
Analyst Raimo Lenschow believes the bear thesis for Elastic around competition from Amazon Web Services Open Distro is overblown. The features released by AWS will likely help it convert a share of the millions of free users onto its platform, but Elastic focuses on large scale deployments, Lenschow told investors in a research note. This is where Elastic will continue to generate the vast majority of its sales growth, says the analyst. He believes the company's runway of growth with enterprises is unaffected by Open Distro and encourages long-term investors to buy into the recent share weakness caused by the lockup expiry. Lenschow reiterated an Overweight rating on Elastic with a $108 price target.
Bear of the Day:
iRobotbecame a Zacks #5 Rank (Strong Sell) in late July at $75 after a disappointing Q2 report propelled Wall Street analysts to lower growth estimates.
My colleague Ben Rains published an article on July 31 describing the growth slide...
Quick Q2 Recap
The Bedford, Massachusetts-based company posted earnings of $0.25 a share. This crushed our $0.03 a share Zacks Consensus Estimate, but it did mark a significant downturn from the year-ago period’s EPS of $0.37. Meanwhile, iRobot’s sales climbed roughly 15% to $260.2 million, which fell just short of our projection.
iRobot Overview
The reason for iRobot’s decline stems from the firm’s exposure to the U.S. and China trade war. Last quarter, the robotic vacuum maker said that it would slowly move production of some of its “more easy to build products” outside of China to help fight tariffs worries. Executives claimed that the efforts would help iRobot create better long-term supply chain flexibility.
But Wall Street doesn’t seem satisfied yet. And this disappointment comes with good reason, since the firm lowered its 2019 guidance on the back of trade-related setbacks. “Although we achieved our U.S. revenue target in the second quarter, we believe that the direct and indirect impacts of the ongoing U.S.-China trade war and the recently implemented 25% tariffs are likely to constrain U.S. market segment growth in the second half of the year below our expectations at the start of 2019,” the company wrote in prepared remarks last week.
(end of Ben Rains July 31 excerpt)
Ben went on to elaborate about company guidance that did not paint a compelling picture, and literally only compelled analysts to revise their models downward.
iRobot executives lowered their revenue outlook from between $1.28 billion and $1.31 billion down to the $1.20 to $1.25 billion range. Meanwhile, the company dropped its earnings guidance from between $3.15 to $3.40 a share this year to anywhere between $2.40 and $3.15.
This guidance in July cause the Zacks Consensus EPS Estimate for the firm’s Q3 earnings to tumble over 48% to $0.58 per share on the back of a 1.4% sales decline that would see it hit $260.8 million. The company’s full-year fiscal 2019 EPS figure was then projected to fall by a similar 48% to reach $2.73 a share.
Sweeping Up Q3 Results
Before I share what IRBT reported on Tuesday October 22, let me make this perfectly clear...
From late July to October 22, IRBT shares fell over 25% -- from $75 to under $55 -- as estimates came down and the Zacks Rank told you "Don't buy, don't buy!"
And tonight, while they delivered more growth -- and IRBT remained a Zacks #5 Rank because of newly falling estimates before the report -- a decidedly muted outlook for 2020 hit like a brick vacuum.
iRobot reported a giant earnings beat of $1.24 vs $0.54 and 9% growth in Q3 revenues to $289.4 million on strong international performance, surpassing the consensus estimate of $259.4 million, which still represented a year-over-year decline.
Even as revenues declined 7% in the US, this was offset by a 40% growth in Japan and 27% growth in emerging markets/EMEA.
But more importantly, management narrowed its outlook on 2019 revenue and operating income. The company currently expects revenues for the full year in the range of $1.2-1.21 billion and operating income in the range of $75-80 million.
Meanwhile, the guidance on full year EPS was narrowed to $2.60 to 2.80, from the prior estimate of $2.40 to $3.15.
In after-hours trading, as I type this on the evening of October 22, this quarterly report and outlook saw IRBT shares reacting down nearly 18% to $44.
Bottom line:The Zacks Rank warned investors in late July at $75 that more pain was on the horizon for IRBT. This week's results and price action could change that outlook, but the stock -- and analyst models -- will likely need time to heal before it's time to jump back on board. The Zacks Rank will let you know.
Additional content:
Chipotle wows the after market today with Q3 earnings results including same-store sales up 11% year over year. Expectations had been for 9.3% growth year over year. Earnings were well ahead of the Zacks consensus — $3.82 per share easily surpassed the $3.16 analysts had been expecting, on $1.40 billion in revenues, better than the $1.38 billion expected.
Chipotle has put much effort into its Digital platform, and results look to be paying off at this time: up 87.9% from year-ago levels. The Zacks Rank #2 (Buy)-rated company is up 2% on the news in late trading.
Texas Instruments posted mixed results after today’s closing bell, beating on the bottom line — $1.49 per share versus the 41.41 expected — on sales in the quarter of $3.77 billion, which was shy of the $3.81 billion analysts were looking for. Guidance was also lowered for Q4 and full-year 2019, sending shares down 9% in the after-market.
Snap Inc. posted a better-than-expected loss in its Q3 earnings report this afternoon: -4 cents per share, compared to the -5 cents anticipated. Revenues of $446 million outperformed the $438 million analysts had been expecting, with Daily Active Users (DAU) coming in at 210 million — 3 million higher than the consensus estimate.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.