Two Technology Stars: Elastic and Zscaler

The technology sector rewarded companies posting strong quarterly results and punished those that disappointed investors. Last week, MongoDB (MDB) and UiPath (PATH) fell sharply, while Elastic (ESTC), a search software company, and Zscaler (ZS), a cloud security firm, posted results.

Elastic reported $0.21 earnings per share (non-GAAP) on revenue of $335 million (up by 19.7% Y/Y). For FY 2025, its revenue of up to $1.48 billion meets analyst consensus estimates. Since Dec. 2023, ESTC stock is stuck trading in the $100 – $110 range. The $10.49 billion market capitalization is relatively small and is an attractive takeover target at this level. The software company would offer observability, security, and search capabilities to an acquirer.
Elastic benefited from strong demand for Elastic Cloud acceleration. Customers likely shifted their purchases away from MongoDB. Elastic compliments GenAI initiatives.

Zscaler jumped by 8.5% on May 31, 2024, after posting billings growth of 30% Y/Y to $628 million. For the year, it expects sales of up to $2.142 billion. Long-term investors may add to ZS stock whenever shares weaken and hold the position for several years. Cybersecurity threats are only growing, which increases demand for Zscaler’s products.

As Zscaler embraces customers consolidating their demilitarized zone, firewalls, and front-point products, its product sales will continue to grow.

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