Elastic: The Under-the-Radar Tech Stock You Need to See

Key Points

• Elastic has surged over 50% since September but dipped nearly 8% on Monday despite smashing earnings expectations.
• Record revenue growth and strong AI-driven demand fueled a top and bottom-line beat in last week's earnings report.
• Analysts are doubling down, with multiple Buy ratings and price targets as high as $148, implying almost 40% upside from Monday's close.

Elastic NV NYSE: ESTC isn't a household name like Microsoft Corp NASDAQ: MSFT or NVIDIA Corp NASDAQ: NVDA, but it's been one of the best-performing tech stocks in recent months. After climbing more than 50% since September, shares of the $11 billion AI-driven search company pulled back nearly 8% in March 3rd's session despite delivering an earnings report that crushed analyst expectations.

This dip could be nothing more than profit-taking - but for investors who haven't been paying attention, it may also be one of the best entry points in months.

With record-breaking revenue, strong AI demand, and a wave of bullish analyst upgrades, Elastic is proving itself as a major player in the AI software space. Let's break down what's driving this rally - and whether Monday's drop is a buying opportunity or a warning sign.

Earnings Blowout: AI Demand Is Fueling Growth

Elastic didn't just meet expectations last quarter; it smashed them. Non-GAAP EPS landed at $0.63, well above analyst forecasts of $0.47, while revenue climbed 16.5% year-over-year, setting a new all-time high for the company.

CEO Ash Kulkarni credited the company's strong execution, AI-driven demand, and rapid innovation for the outperformance. He told investors, "We exceeded guidance across all revenue and profitability metrics in the third quarter. Our results reflect ongoing momentum across all aspects of our business, led by strong sales execution, continued market demand for our products, and our relentless pace of innovation, reinforcing Elastic as the leader in Search AI."

One of the biggest growth drivers? Generative AI applications. More customers are looking for AI-powered search solutions, and Elastic is positioning itself as a leader in this space. With companies consolidating onto single platforms for AI-based search solutions, Elastic is benefiting from strong enterprise adoption - a trend that's likely to continue fueling growth.

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Analysts See Massive Upside Despite the Dip

The post-earnings dip, including Monday's 8% sell-off, clearly hasn't shaken Wall Street's confidence.

Truist Financial reaffirmed its Buy rating on Monday afternoon and raised its price target to $145.

This echoed the stances taken by UBS, Scotiabank, and Morgan Stanley, who all reiterated their bullish outlook last week.

UBS's $148 price target, in particular, is worth noting as it suggests a nearly 40% upside from Monday's close.

For a stock that just crushed earnings expectations, analysts are making it clear: this pullback isn't a cause for concern; it's a potential buying opportunity.

Strong Fundamentals Suggest the Pullback Could Be Temporary

There were reports on Monday of a pending class-action lawsuit being taken, which likely spooked investors, but the reality also is that after a 50% rally in five months, some profit-taking was inevitable. Even the strongest stocks don't move in a straight line. There's also the broader market uncertainty at play. The S&P 500 has looked a little shaky in recent sessions, and if market sentiment turns more risk-off, high-growth stocks like Elastic could see more short-term downside.

That being said, the fundamentals remain strong, and with an RSI of 48, Elastic has plenty of room to run before it's considered overbought. If the broader market stabilizes, this stock could be primed for another leg higher.

Keep Elastic on Your Radar—This AI Stock May Not Stay Cheap for Long

Elastic's AI-driven growth story is hard to ignore. The company just delivered record revenue, surging demand, and a strong long-term outlook, yet the stock is still pulling back on profit-taking.

With top analysts maintaining Buy ratings and targets pointing to a nearly 40% upside, this dip could be an opportunity for investors who missed the initial rally.

For those looking to add a high-growth AI play to their portfolio, Elastic could be one of the most compelling opportunities in tech right now. Keep this one on your radar because once the market regains its footing, Elastic may not stay this cheap for long.