Data research software company stocks Elastic (NYSE: ESTC) rose 10.7% this week, according to data provided by S&P Global Market Intelligence. No new financial numbers have been provided, but this most recent jump is likely in response to new product integrations as well as an acquisition. The stock has risen 18% so far in 2021, but is up nearly 70% from May lows after a sell-off in growth stocks.
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Just last week, Elastic announced extensive integration of its software with Alphabet‘s (NASDAQ: GOOGL)(NASDAQ: GOOG) Google Cloud. As more organizations migrate their data to the cloud, Elastic’s software can be a powerful tool that can give a business insight into all kinds of issues, from employee workflow optimization detection of cyber threats. Leveraging its utility with one of the largest public cloud providers opens new doors of opportunity for Elastic’s product suite.
The biggest news, however, was the announcement that Elastic is acquiring Optimyze, a cloud-native company that helps with data profiling to streamline the work of IT teams. Elastic’s interest here is to create a more unified cloud “observability” suite, much like what industry peers Splunk (NASDAQ: SPLK) deployed and what Dynatrace Holdings (NYSE: DT) specialize in.
The purchase of Optimyze follows two other small acquisitions last month, cybersecurity company Build.Security and cloud infrastructure software company Cmd.
The whirlwind of activity is making investors optimistic, and for good reason. In the last quarter published by Elastic, revenue increased 50% year-over-year to $ 193 million. The outlook for the next quarter (the second quarter of 2022, which ends on October 31) calls for a sales increase of at least 33% year-over-year.
Elastic is not yet profitable, but this is by design as it spends a lot on marketing and developing its software platform. With $ 991 million in cash and cash equivalents at the end of July, offset by debt of just $ 566 million, Elastic can afford to spend aggressively for now. At least when it comes to revenue growth, the company’s efforts are paying off.
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Suzanne Frey, an executive at Alphabet, is a member of the board of directors of The Motley Fool. Nicholas Rossolillo and his clients own shares of Alphabet (C shares), Dynatrace Holdings LLC and Splunk. The Motley Fool owns shares and recommends Alphabet (A shares), Alphabet (C shares), Elastic and Splunk. The Motley Fool has a disclosure policy.
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