Why elastic stocks gained 16% in October

What happened

Actions of Elastic (NYSE: ESTC) increased by 16.5% in October, according to data from S&P Global Market Intelligence. The company behind Elasticsearch, a full-text search and analytics engine, announced some interesting deals last month. These events were the backbone around which most of October’s shareholder returns were realized.

So what

First, Elastic hosted its annual ElasticON conference, highlighting how customers are using Elasticsearch to solve their data analytics problems. The virtual event featured speakers by familiar names such as Microsoft, Twitter, General Motors, and NASA, a who’s who of leading Elastic customers. Attendees left the conference with a better appreciation of Elastic’s cloud-based search systems, artificial intelligence tools, and the growing collection of data security services.

Then, the company extended its integration with Alphabet‘s (NASDAQ: GOOG) (NASDAQ: GOOGL) Google Cloud Platform. With the new features of Elasticsearch, Google Cloud Console now offers more data collection options and a simpler workflow for installing and managing their data capture agents. The partnership announcement inspired the biggest one-day jump of the month as Elastic shares rose 3.8% the next day.

Gains continued as Elastic acquired data profiling start-up Optimyze. The deal was announced on October 14 and closed on November 2. Financial terms were not disclosed, but the acquisition will strengthen Elastic’s data analysis tools with Optimyze’s ongoing performance profiling of IT systems handling continuous data flows. Optimyze claims to provide insight on which line of code is consuming which CPU resources on installed fleets of several thousand computers. In the long run, this addition of top talent through acquisition should give Elastic a performance-based advantage over other data research solutions.

Image source: Getty Images.

Now what

Elastic stocks have now gained 47% in 52 weeks, trading at a high 23.5 times trailing sales. Here we take a look at an exciting growth stock, with very high expected valuation ratios.

Management sees a $ 78 billion annual market opportunity in the business data analytics industry. Revenues of $ 673 million represent a tiny 0.9% share of that huge pie, leaving the door open for continued high-octane growth.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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