3. Elastic N.V. (NYSE:ESTC)
Broad Bay Capital’s Stake Value: $55,828,000
Percentage of Broad Bay Capital’s 13F Portfolio: 8.73%
Number of Hedge Fund Holders: 57
Elastic N.V. (NYSE:ESTC) provides technology solutions built to function in multi-cloud settings, be it public or private clouds. Elastic N.V. (NYSE:ESTC) focuses on product innovation to draw clients and grow its business. As a result, the company’s client base expanded by 21% to 19,300 customers over the previous year. In addition, the typical customer spent roughly 30% more, showing that the firm is successful with its “land-and-expand” approach.
Insider Monkey’s hedge fund database reveals that in the first quarter of 2022, 55 funds were bullish on Elastic N.V. (NYSE:ESTC). In the second quarter of 2022, the number rose to 57 hedge funds. In addition, following the company’s analyst day on September 20, Brent Thill of Jefferies increased his price objective on Elastic N.V. (NYSE:ESTC) from $80 to $90 and retained a ‘Hold’ rating on the shares.
According to the 13F filings for the second quarter of 2022, Broad Bay Capital held over 825,000 shares of Elastic N.V. (NYSE:ESTC), amounting to more than $55.83 million. Elastic N.V. (NYSE:ESTC) is the third-largest holding of the hedge fund and represented 8.73% of its 13F portfolio.
Elastic N.V. (NYSE:ESTC) was discussed in Greenhaven Road Capital’s Q2 2022 investor letter. Here’s what the firm said:
“Shares of Elastic Software, which powers the search for customers such as Uber and provides other security software, ended the quarter down approximately 40% for the year. From the share price, you would think that demand is falling off a cliff, but that is not the case. Revenue is growing at 35%, the balance sheet is rock solid, and net revenue retention continues to hover around 130% as current customers increase their purchases with increased usage. While companies not generating positive cash flow have been obliterated in this downturn, this is a very healthy business that will very likely be cash flow positive this fiscal year. When addressing demand on the most recent call, the CEO did not use the term “forced buyer” but he could have:
“We have not seen any indication of slowdown in the demand and the consumption…. these things are mission-critical to them. So from their perspective (customers), as data grows, they need to use Elastic, and they continue to use Elastic and that’s not a place where we see customers trying to make any optimization. So that is an inherent strength for us, and it’s continuing.”
Given Elastic’s growth rates and operating leverage, if the multiple ceases to compress, we see a clear path to 30%+ returns from here, and still higher returns if / when there is any multiple expansion. Their stock may not have forced buyers, but their products do.”
