Elastic (ESTC) valuation

Every once in a while I see a valuation that gets detached from reality. When Square was at $100 and a PS over 30, it was hard to understand what was happening. Well, it’s not that complicated. It was overvalued. The hype train had left the station.

I called out ZS on August 27th when it was at a PS of 33 ($47/share). https://discussion.fool.com/zscaler-33159259.aspx It has taken 5 months (and a couple earnings reports) just to get back to that level (PS is actually lower today since the revenue is up).

Today I believe it’s Elastic whose share price is indefensible. The PS (if you use 87.5 million fully diluted shares, as I do) is 37.7. That makes it an 8 billion dollar company with $212 million in TTM revenue. Let that sink in a minute.

I have no short position in Elastic, but I thought I would at least make my concerns known. I don’t think anyone here is rocking a 10% or higher ESTC allocation, but just please use caution. Seems like a wonderful time to sell a covered call maybe.

Just an APB. Take it for what it’s worth.

Bear

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Yes, I really like Elastic but sold my position due to valuation concerns and added the proceeds to Twilio and MongoDB instead. Kept all my Zscaler, though :slight_smile:

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Hi Bear

It doesn’t alter the substance of your point, but where are you seeing a valuation of 8B for ESTC?

Im seeing 6.3B in all my sources

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My guess would be they aren’t using fully diluted shares like Bear is. When he posted that, ESTC was around $90/share and at 87.5 million shares you get around 7.8 billion.

MC

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Hi bear,
You successfully got us out of elastic near the top
I’m just wondering when do we get back in now
I realize I may be risking being off topic by posting this