2nd Skies Trading

Can Elastic Stock Stretch To 10 Times Its Current Price?

The tech space is so vast and fast-growing that there are growth stocks hiding in every nook and cranny of the demography. Today, we set our aim on Elastic NV (NYSE: ESTC).

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Source: RODNAE Productions

Elastic is a search, data logging, and data analytics company. Its three major products are Elastic Search, Elastic Observe, and Elastic Security.

It is because of companies like Elastic that you can easily locate the closest Uber to you. Elastic’s technology is also behind the user-matching algorithm on Tinder. Apart from Tinder and Uber (NYSE: UBER), Elastic also boasts of other big customers, such as Adobe (Nasdaq: ADBE), Shopify (NYSE: SHOP), Walmart (NYSE: WMT), and Pfizer (NYSE: PFE).

These big companies aren’t the only ones who subscribed to Elastic’s services. More companies are registering themselves in the company’s books, helping the company reach a massive 17,000 new customers In Q2 FY 2022 alone.

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Source: Elastic

Apparently, attracting new clients isn’t their problem at Elastic. And this growth clearly reflects on the company’s revenue, with the total revenue increasing by 42% y/y to $206 million in its most recent quarter, and subscription revenue making up a whopping 92% of the total revenue.

The next place to check to see if Elastic is a worthy growth stock is how it sizes up against its competitors. And even here, ESTC isn’t doing badly. Its enterprise search product is the flag bearer product for the company, and it remains one of the popular in the market by far. Forrester Wave recognizes Elastic as the leader in cognitive search, with Amazon Web Services, Google and Microsoft trailing it.

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Source: Elastic

We see Elastic becoming a crucial part of the platforms of a larger customer-base as more companies set up and expand their digital infrastructure.

Technical Analysis

When we first had ESTC stock on our radar some weeks ago, it was at a crucial point where it would either break out of the $170 – $179.5 resistance level above it or bounce off the level and fall to the lower support levels below it.

The latter played out.

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The price recently fell to the $94.5  – $103.5 support level and bounced off it. This lower support level would be a good place to buy the stock for value investors if the price falls back to it. But if the price breaks out of the $131.5 – $140 resistance level, the retest of the level would be the next technically logical place to buy.

Growth investors, on the other hand, can buy this stock and hold long-term now, regardless of whether it breaks the resistance level. This is because we believe the ESTC stock could be at least 2 times its current value within the next decade.

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