Thoughts on Elastic

Investment Analysis Clubs Saul’s Investing Discussions
1

ESTC is trying to be a platform for all - infrastructure, SIEM, security, logging. It’s pricing approach is indeed revolutionary. Competing with DDOG in all segments. Market clearly believes that ESTC’s 60% growth won’t last. Else why would it have a P/S of 16, even SMAR which is growing slowly and has similar margins has a P/S of 24.

I keep reading thoughts like this from Elastic longs. Elastic keeps having “great results” but doesn’t move and they can’t figure out why. Elastic has a great platform (even if it is open source) and it keeps developing more and more uses for it. So why doesn’t it move? When I say “it doesn’t move”, what do I mean? Well:

On Jan 2, the first trading day of 2019, ESTC closed at $66.37… Yesterday Jan 24, 2020, it closed at $67.00, flat (up just less than 1%), in a year and a few weeks. It’s been dead money in a year when our other stocks have gone wild.

What do I mean when I say that our other stocks went wild during this time while Elatic has been dead money?

On Jan 2, the first trading day of 2019, AYX closed at $58.52… Yesterday Jan 24, 2020, it closed at $134.13, up 129% in the same time, while Elastic didn’t move.

On Jan 2, the first trading day of 2019, OKTA closed at $63.26… Yesterday Jan 24, 2020, it closed at $129.66, up 105% in the same time, while Elastic didn’t move.

On Jan 2, the first trading day of 2019, COUP closed at $62.47… Yesterday Jan 24, 2020, it closed at $163.60, up 162% in the same time, while Elastic didn’t move.

This must be driving the Elastic longs crazy. They keep saying “Wait for this!” or “Wait for that!” but why?

What is causing this lack of movement? There must be some reason. I looked back at their last fiscal year (2019) and I see that they lost $1.11 per share!!! And that’s adjusted. For those who look at GAAP, they lost $1.86 per share! Could that be causing part of the hesitation for buyers to come in?

Is it getting better this fiscal year? Well the first two quarters of this fiscal year their adjusted loss per share was 32 cents plus 22 cents for a loss of 54 cents in six months, or a run rate of a loss of $1.08 per share. No improvement there. Their GAAP losses were even worse at 56 cents plus 64 cents for a loss of $1.20 per share in six months, or a yearly run rate of a loss of $2.40 per share, considerably worse than last years loss of $1.86 per share.

Well, that was the last fiscal year. How do the current six months compare with a year ago (year-over-year)? Are they cutting their losses per share this year? Well, their GAAP losses for these six months a year ago were $1.20 per share, and this year they cut them down to… $1.20. Oops! They didn’t cut them at all!

Oh! but it’s worse than that! They have twice as many shares this year as last! That means they lost twice as much money! Yep, sure enough, six month GAAP net loss was $92 million compared to $46 million a year ago!!! They doubled their losses.

And how about the continuous stories about how hard it is to use Elastic, while the world is moving to services like Datadog, where it’s so easy to use that they don’t even have any service revenue. People just download it and start using it. Which of those sounds like “the future” to you?

Why is this happening?

  1. Maybe it takes a lot more S&M expense to sell a customer a platform that is harder to use?

  2. Maybe open source sounds good, but is simply harder to make money at?

  3. It’s also my impression (and what do I know?) that open source isn’t a business strategy for the Elastic CEO, it’s an ideology! That means he cares more about getting warm fuzzy approbations from fellow open source-ers than he cares about making a profit for his shareholders. Just my impression.

  4. How about competition? Well Alteryx, Okta, and Coupa don’t seem to have effective competition. They dominate their categories. Elastic on the other hand is trying to do a little bit of everything, and thus seems to be operating in a jungle, with loads of people who do what they do in each field.

But those are just my explanations and are simply surmises.

If you are long Elastic, I wish you good luck because I don’t want anyone on this board to do poorly, but I think you should really consider whether you have better options.

Best,

Saul

(I couldn’t get six month adjusted results yoy as the first fiscal quarter last year was pre-IPO, and they didn’t have a earnings report)

90 Likes
2

Welcome to my Elastic slap in the face provided by this post…and boy did I need this. I have spent the past few weeks whining and moaning to myself and trying to rationalize away why Elastic has not been enjoying the same bounce as the balance of my portfolio.

I too own AYX (4.4X), OKTA (4.4X) and COUP (2.7X) and have done so for an extended period of time.

You are absolutely right; why wait? Why wait with a pile of dead money sitting over in the dark corner of my portfolio when I could put that capital to work!

Thanks; I am looking forward to Monday!

10 Likes
3

Saul, you summarized quite well why I have been avoiding ESTC for quite some time. But another thing I keep hearing from longs is “Elastic is everywhere!” Maybe because it’s free? A lot of people will take/use things when it’s free, but it doesn’t mean they’ll keep using it if you start to charge for it. So this makes it difficult to tell what real value ESTC brings. When investigating/comparing ESTC to SPLK a year ago, every use case I could find said they are using ESTC because it was cheaper. Not because it was better. And here Splunk is still doing quite fine with their expensive product.

The whole DDOG being built on Elastic is the best example of it. Even if DDOG pays ESTC, it’s clearly DDOG that gets the biggest benefit.

And now they are talking about their “disruptive pricing” strategy in End Point Protection. They spent $234 million on Endgame and surely will just put more money in it as time goes on.

I’m not here to talk anyone out of it and I’m quite impressed that they seemed to have stabilized at the 60% growth rate the last few quarters, which is a plus for longs, but their characteristics do not fit into my strategy in what to look for in a stock.

3 Likes
4

Saul,

ESTC non GAAP numbers for last 6 m as compared to 6 m 1 year ago:

GM is stable at 74%
OM stable at 22%
SM expense improved slightly to 49% and to 46% in the last Q!

GAAP numbers are higher due to acquisition related expenses for Endpoint. You can see pages 14 and 15 here:

https://ir.elastic.co/Cache/1500125906.PDF?O=PDF&T=&…

In summary margins have not gotten worser and SM margin has improved slightly in the last Q. Making losses now to gain market share has been the focus of most SAAS companies till late last year when market started valuing earnings more. ESTC’s rev growth of 60% is faster than that of MDB, and SMAR and its margins are similar. Yet its P/S sits at 16 as against P/S of 22 for the other 2 companies. It seems to me that the market has priced in that ESTC growth should crash to 40% over the next couple Qs. They are suspecting the 45% billings growth and low deferred rev which Shay blamed on some govt. contracts that did not close last Q. Next EC if they can maintain the 60% rev growth we should see ESTC stock price quickly back up. This is just my opinion and I maybe totally wrong.

Btw if you are concerned that ESTC is trying to do a little bit of everything in a jungle where other companies have product expertise (NEWR for APM, SPLK for SIEM etc.) then DDOG is doing exactly the same thing. Both CEOs believe that the individual silos will break and all these products will become features of their platform. Shay says he is trying to hasten this with their pricing approach. We should soon know if they are correct.

19 Likes
5

It seems to me the primary driving reason that justifies continuing investment in Elastic is that it is relatively cheaper than others like AYX, COUP, etc.

Then again it was relatively cheaper last year as well and yet you can nudge the relative stock growth. Cheaper did not mean better.

Elastic may surprise this quarter with Federal sales expected last Q to roll into this Q. But no one can name a single commercial market (ie they get paid extraordinary sums for) that Elastic dominates. Just that it is growing fast and is cheaper.

Tinker

6 Likes
6

Then again it was relatively cheaper last year as well and yet you can nudge the relative stock growth. Cheaper did not mean better

A year ago ESTC market cap was the same but it’s rev has grown 60% in 12 m. So, a P/S of 26 (against 16 now) which is closer to the top end of our companies at that time. It was not cheaper then. It is #1 in search.

8 Likes
7

It is #1 in search. How much profit do they make in search?

They are #1 in search volume but only a small cohort pay Elastic. Their search is a huge product success use wise, but not such a success on a commercial basis that involves the self interest of making hordes of cash from it.

No one has identified one COMMERCIAL market where Elastic dominates. Logging perhaps. But no, commercially Elastic search is not a success. You need to get paid for it to be a commercial success. Otherwise what you have are metrics like eyeballs (like in the internet bubble) instead of any material commercial measures.

By all means, prove me wrong. Saul’s numbers were quite convincing. If Elastic charged a commercially reasonable rate for its search, the use of its search would materially decline and Elastic may no longer be #1 in search.

Elastic has a much more holistic strategy of converting eyeballs to cash. To date this strategy is not showing any leverage. If you think it will (and it’s “cheap” just because the market “just does not understand”) then you may be rewarded. There is presently no data, however,that you can point to, that Elastic is a commercial success.

It is a good exercise if you can specifically point to real data evidencing error on commercial success.

Tinker

8 Likes
8

Tinker, couldn’t the same argument be levelled at DDOG? DDOG don’t dominate any market, they have less revenue than ESTC despite being two years older. DDOG are growing faster, but don’t replace incumbent technology.

DDOG should overtake ESTC in revenue going forward, but they’re both playing in the same sandpit.

ESTC has a bunch of “potential”. “Potential” unfortunately won’t make the stock price increase however. They’re aiming at being disruptive from a pricing point-of-view and if you believe the “massive IT platforming” that DDOG talk about, it seems likely theres enough market for more than one.

ESTC IMO is aiming at a less-funded, more DIY market than DDOG. ESTC have slightly more customers, but DDOG has more customers >$100k ARR. DDOG is reputed to be pretty expensive, but it remains to be seen whether theres space for ESTC to make money underneath those moneyed larger companies.

The biggest issue with ESTC as far as I can tell is that they just spend so much money. R&D, S&M, and G&A are all significantly larger than DDOG, and it’s not clear that the money is well spent. If that spend was reduced to DDOG type levels?

The other complications with ESTC are the AWS fud, and the ability to use a large chunk of the functionality for free.

ESTC is a longer-term play vs DDOG/SPLK/NEWR. Commercial success…? well, they made slightly less revenue than AYX (371.23m vs 342.25m TTM). Thats not terrible. There’s obviously a reasonable chunk of demand for their products.

If they could just stop spending so much $$$! But maybe they’re looking longer term than we are? I’m willing to give a few more quarters to see if the dust settles somewhat. In the worst case, I’ll learn (yet again) that Saul was right and I wasn’t :wink:

cheers
Greg

Long ESTC

5 Likes
9

I’m an Elastic owner. I usually don’t admit that in public but I’m turning over a new leaf here.

In all honesty, I’m struggling with my Elastic position and certainly it hasn’t done well as Saul eloquently points out, but…

Before I comment further, I’d like to take a few sentences from Bert’s article to subscribers on December 6, 2019. This is done with his permission and this could very well have been on Seeking Alpha too, but I haven’t checked.

I am going to take up the cudgels to suggest that investing in Elastic shares at the current level will turn out well-or better than well…

… I think Elastic is a misunderstood hyper-growth company with a plethora of technology that has suffered in terms of its share price from the fact that what it does and offers is a bit hard to define…

There are many different ways to invest. Saul has a strong bent toward companies with the best metrics and increasing profitability while generally ignoring valuation. Bert certainly looks for great metrics but has a more value oriented style. Bert tends to be more patient and Saul more nimble. I do not believe either way is the right way or wrong way.

As far as Bert’s prediction on how investors in Elastic will do, I tend to side with him and am holding my position which is one of two losers in my portfolio right now. Elastic remains on a short leash for me, but I’m not ready to jettison it just yet. I certainly like to see improving profitability, but there is a case to be made for increasing losses too if the LTV is much greater than CAC. Unfortunately, we aren’t privy to LTV/CAC.

The 2nd comment copied above from Bert hits home. The market, including me, is struggling to understand Elastic. What does their CAP look like? They have a new pricing paradigm. How do we decipher that? And the open source aspect provides uncertainty. And to top it off, the SaaS offering is growing rapidly and is having near term impacts on many metrics. It is a tough business to understand right now.

I tend to hold some smaller positions in companies that are not extraordinarily valued, but my two largest positions are TTD and SHOP (AYX is close). SHOP is so highly over valued it is tough to deal with. But the market has awoken to Shopify’s competitive advantage and durability. All of that remains to be seen with Elastic.

I’ll be holding my position at least through the next earning’s report.

Elastic is not a no brainer investment. There is a chance they stumble and the share price gets beaten down further. There is also a chance they do well and the valuation explodes.

Sorry for the ramble.

A.J.

40 Likes
10

I disagree with Datadog not dominating. The metrics are overwhelming and not only faster growth but the unit economics are world’s better for Datadog. Sales efficiency is nearly unheard of.

As for disruptive pricing…price is not cost. Takes a lot more labor and effort to work with Elastic. Elastic needs to close that gap.

But in the end relative success matters a lot. Smartsheet vs Monday for example. Crowd vs any other end point vendor. Palo Alto vs any NGFW. Cisco vs any other router or switch. Arista tearing marketshare from Cisco in cloud titans and so on. When it comes to self service infrastructure monitoring Datadog is cleaning up. Growing faster, with far better economics.

Elastic will close the market cap gap between them when their unit economics improve (show leverage) and they start to expand marketshare. Those are the two attributes we can measure and that largely correlate with quality of sustainable earnings in the end.

It is rational to say Elastic is relatively cheaper to its real business potential than Datadog is to theirs. I won’t argue with that. But that does not make it more likely that the market finally “gets it” when being “cheap” remains the primary reason to be high on Elastic.

I agree it is a longer term project. The duration it takes to build out the business is yet another risk, which rationally creates a larger discount rate.

Tinker

7 Likes
11

I hear people saying, “Well holding it has been a disaster, but I’ll hold it a little longer and then I will have been proven right all along.” That seems to me to be one of the cardinal sins in investing: not being willing to admit to yourself that you made a mistake, and then going ahead and fixing it.

You’ll have to explain to me how holding Elastic all this time won’t prove to have been a bad decision over the last year. For example, in my post that started this thread I listed other places you could have put your money: Okta, Alteryx, and Coupa.

If you had $100 in Elastic on Jan 2, 2019, you now have $101 (almost). You’ve gained $1.

Alteryx has the middle gain of the three I mentioned, so lets compare to that.

If you had $100 in Alteryx on Jan 2, 2019, you now have $229. You’ve gained $129, compared to gaining $1 in Elastic.

Let’s say the SaaS companies like Alteryx rise 40% over the next year, and Elastic finally stops flat-lining and joins the parade and rises 40% with them. (It’s not showing ANY current signs of doing so, but let’s just say.)

A year from now, your Jan 2019 investment of $100 in Elastic will have turned into $141 and you will have gained $41 over two years.

A year from now, your Jan 2019 investment of $100 in Alteryx will have turned into $321 and you will have gained $221 over two years. ($229 x 1.40 = $321)

How will that prove that you were right all along?

And let’s say a miracle occurs and not only does Elastic rise in the next year, but rises more than Alteryx. Keep in mind that there is absolutely no current indication that it will quit flat-lining at all, much less beat Alteryx, but just say it does, would that be cause for you to celebrate. Let’s go off into fantasy-land and say Elastic rises 50%, or even 60%, while Alteryx was just rising 40%. Whoop-dee-doo! You would have gained $51 or $61 instead of $41 in two years, while the same money in Alteryx would have gained $221 in two years.

But if we are thinking that way, we have to consider a continuation of the present: What if Elastic continues to almost flat-line over the next year and rises just 5%. You will have gained 6% in two years, while an investment in Alteryx will have gained 221%. Now that’s a significant opportunity loss.

How can hanging on and waiting, and not admitting a mistake, not have been one of the worst things you could have done with that $100 ???

I have to make clear that I have no idea what will actually happen with Elastic over the next year, Maybe they will rise 200% and be almost up to where Alteryx will be. Or maybe Alteryx will hit a bump in the road and fall 50% instead of rising. I can’t predict the future. I’m just going with what seem to be the the most likely probabilities.

Best,

Saul

36 Likes
12

You’ll have to explain to me how holding Elastic all this time won’t prove to have been a bad decision over the last year.

I don’t think anyone is arguing that holding Elastic last year resulted in good returns. What people pretty well exclusively care about is what Elastic’s returns will be in the future.

If you’re going to make the argument that because Alteryx went up much more than Elastic last year “the most likely probabilities” favor Alteryx this year as well, you should consider adding momentum as a key criteria for deciding between high growth investments in the knowledgebase.

My interpretation of your process is that momentum does matter to you, but isn’t the overriding factor. Negative short-term momentum in the face of excellent results doesn’t phase you, but negative momentum in light of mediocre or poor results does. In general, negative price movement seems to result in you spending more time checking your thesis for holes (as most of us do) and giving a stock less slack.

24 Likes
13

– Per Texmex
A year ago ESTC market cap was the same

– Per Saul
On Jan 2, the first trading day of 2019, ESTC closed at $66.37… Yesterday Jan 24, 2020, it closed at $67.00, flat (up just less than 1%), in a year and a few weeks.

– Again Per Saul
Oh! but it’s worse than that! They have twice as many shares this year as last! That means they lost twice as much money! Yep, sure enough, six month GAAP net loss was $92 million compared to $46 million a year ago!!! They doubled their losses.

If the price is the same and they have twice as many shares, their market cap has essentially doubled. However even with double the loss, their EPS loss is about the same as last year because now the loss is shared by double the number of shares. I think we get tunnel vision if we focus too much on the top line number.

To me Saul’s argument does sound more relevant here. But, I should also let you know I do not own ESTC and have not even looked at it besides just casually reading the posts here.

  • Ruhaan
    Full Disclosure: No position in ESTC
2 Likes
14

There are a couple of truisms in the stock market. (1) over the same period of time, with the same economics, trying to disrupt the same type of markets, being valued by the same markets, Alteryx/Coup and the like (at higher valuations at the time - lets just say from the same valuations) went way up while Elastic did nothing. Not for a short period of time, but for more than a year.

(2) Winners tend to keep winning far more often than non-winners start winning. Relatively speaking Elastic has not been winning.

You can probably beat the market simply by buying stocks with relative strength in the top 85-90% or better.

So to keep holding Elastic requires you to (1) believe that the market just overlooked Elastic in truism #1, while ignoring truism #2.

You do these because this year, this year! The “undervalued” Elastic will outperform! Year to date (and as Saul states, who the fracking {Galactica lingo so perfectly appropriate) knows. Maybe this is the year SHOP falls apart and Elastic ascends to Qualcommian like glory (26x in one year, but with Qualcomm there was the ultimate in FUD - competition called CDMA as so complex to be impossible and there was a lawsuit pending - thus why the share price was so tiny at the time in 1998 and 1999). However:

(1) is there real FUD (and remember fundamentals are not FUD, but issues unrelated to fundamentals that create the fear doubt and uncertainty)? (2) is there a new line of business or something that will change and strengthen or accelerate the business going forward that is not well known or understood but is otherwise transparently obvious? (3) anything else?

I cannot think of any of it other than Elastic will continue to improve its products, and as I’ve moves forward more and more of the free users will be drawn to the paid plans.

So, why is the market so wrong about Elastic (or just failed to take notice)? Why is Elastic’s relative stock strength to be ignored?

Oh yes, the answer, every time, because it has a relatively cheap multiple.

That is the reason I hear from everyone who is bullish. It is cheap. Never mind how Datadog can in the same market achieve such tremendous economics using the same software that Elastic not only uses but invented and maintains?

I mean, really. Datadog uses Elastic’s software. Datadog competes in the same exact market. Yet Datadog has finances that Elastic can only dream of. What does this say about Elastic?

Let’s honestly answer that question. It means that Datadog is destroying Elastic at its own game. It means that the market problems Elastic wants to resolve exist and the market wants solutions. It also means that despite Elastic everywhere, the market is willing to pay for Datadog to solve it instead of sticking with Elastic that is otherwise everywhere.

I just got out of the ER (still hurts, but no big problem) so perhaps my brain is not working properly. But is that not profound and a real problem for Elastic. Elastic offers a solution that is “cheaper” (by price anyways) and yet the market is running to Datadog instead (who provides a solution using the same software that Elastic provides and yet customers seem to prefer Datadog’s solution despite being MORE EXPENSIVE and less pervasive).

Does not that express a real problem in not only Elastic’s business model but also that Elastic product is not providing the solution the market wants? I mean how else could Datadog succeed using the same exact software to sell into the same exact market against a cheaper product!

Again, perhaps that is silly logic on my part from a tough day.

Tinker

38 Likes
15

Splunk said they have fended off open source plenty of times because of superior tech. ESTC is not the first challenge they faced and I said this same thing a year ago as I’m saying now. You can’t say ESTC is disrupting a company that grows YOY in one quarter what ESTC does in total over three quarters.

There is a huge desire to get in on the ground floor of some young up and comer but the truth is the odds are very much in favor with the large incumbent, which in this case is Splunk.

And selling things at a loss is not “disruptive pricing.” If you think ESTC’s EPP pricing is “disruptive” you have to make the argument that conventional EPP companies have been making too much money. When to this day they all spend heavily on R&D. EsTC says they don’t price on endpoint but by data usage. Either way, economics suggests someone has to pay for that R&D. So all you’re going to do is attract low data usage EP which will not allow you to properly fund operations. This is all economics at work. Someone has to find R&D.

I’m impressed ESTC has had 3 quarters in a row around 60% growth. This is a big improvement over their falling growth rates. But if it’s because they’re selling $1.00 worth of product for $.80, I can see how they would continue to grow.

Or their low cost EPP will get higher quality marks and Gartner awards compared to CRWD who charges like 3-5x the going market rate. Who has no problem growing faster at higher TTM revenues. Which is more likely?

7 Likes
16

But is that not profound and a real problem for Elastic. Elastic offers a solution that is “cheaper” (by price anyways) and yet the market is running to Datadog instead (who provides a solution using the same software that Elastic provides and yet customers seem to prefer Datadog’s solution despite being MORE EXPENSIVE and less pervasive).

You NAILED it!

A free boat is the most expensive boat you can own.

It is cheaper to take a bus than a plane.

It is cheaper to take a bus than drive a car.

It is cheaper to do your own surgery.

Cheaper is NOT less expensive.

Cheers
Qazulight

5 Likes
17

There definitely seems to be something these companies that get cursed by customers for being overpriced but grow in spite. And yet the customers keep returning. Something I’ve started to observe. DDOG gets the same comments. But NEWR did a year ago too and they were growing fast a few years ago.

Due to the competitive landscape and not knowing if they will curse DDOG for having superior tech but buy anyways in such a crowded market is why I do not own DDOG. I do not know if their plethora of competitors are putting worthy options in the market as we speak.

3 Likes
18

Hi Saul, I am new here, and have learned a lot from you. This is not a disagreement, this is just a question; playing the devil’s advocate for the purposes of discussion. CRWD, ZM, and ZS are recent IPO stocks currently in your portfolio. ESTC is a recent IPO no longer in your portfolio. ESTC is currently trading below its IPO opening price. Therefore, it must be a bad investment. However, CRWD is also currently trading below its IPO opening price. ZM is barely above its IPO opening price. ZS is not much higher than it was a year ago. All these stocks had huge pullbacks during the second half of 2019. How is ESTC a worse investment than CRWD, ZM or ZS, all of which you do still hold? They’re all closer to their 52-week lows than their 52-week highs, so these have not been good investments for anyone yet really. I know the numbers are great on your picks. I’ve read all your posts over the past year. We all know the metrics are moving in the right direction. My point is why single out ESTC when CRWD, ZM and ZS have suffered the same dramatic selloffs? CRWD, ZM, and ZS all have better metrics, by your standards, but they all three crashed not much differently than ESTC. Is the selloff in ESTC just part of the huge rotation we saw last year? Is the quick recovery of AYX just a sign of what a phenomenon it is? Jim Cramer said AYX is one of the best stocks he’s ever seen in his entire life! I hold AYX. But for the purposes of portfolio diversity, I do hold positions in all stocks listed here. ESTC is the smallest position, my lowest confidence. But why can it not recover too like you presume CRWD, ZM, and ZS will? You know better than anyone that AYX went public in 2017 at a very tiny market cap and very reasonable valuation. The question is, were the market caps and valuations for newer IPOs like ESTC, CRWD, and ZM too high for the public markets? Apparently, public sentiment reacted negatively against UBER, LYFT and the greedy private VC market behind WeWork. Our stocks got dragged into the mess. AYX, TTD, and OKTA are bouncing back the fastest. You must believe CRWD, ZM and ZS will too in time. Why won’t ESTC bounce back also? It seems to have already hit the floor and is coming back like everything else. The one-month price action for CRWD, ZM, ZS and ESTC is pretty similar. I do have a high conviction like you do with CRWD. But rather than sell ESTC now, I’m giving it a little more time. Even SQ is showing some life now. SHOP didn’t do much for 2018 but it more than made up for it in 2019. No one is saying you should buy ESTC now. But for someone who already has a little ESTC, it will be very frustrating to sell it right now and then watch it go up in 2020. I sold one of the best stocks of the last 3 months only days before it woke up. (I can’t mention the name, but you used to hold it years ago.) You are being patient with ZM, CRWD, and ZS; maybe that’s how an ESTC shareholder feels. And finally, could the wonderful growth for ZM already be baked in at a $20 billion market cap? AYX is still only about $8 billion now, and ESTC is only about $5 billion. I believe WDAY was an example of a stock that went public at a high market cap valuation and the price didn’t really go anywhere for years. I have a position in ZM, but I don’t know if it’s going to perform better than ESTC or not yet. Still, I hold a higher position size of ZM because of conviction. Thank you for everything you do. Best, Broke

12 Likes
19

… in my post that started this thread I listed other places you could have put your money: Okta, Alteryx, and Coupa.

If you had $100 in Elastic on Jan 2, 2019, you now have $101 (almost).

Saul, you picked Okta, Alteryx, and Coupa for comparison against the start of 2019. A comparison to what you owned then could be indicative of likely picks at that time. From your month-end post of 12/31/2018:

Here are my positions in order of position size. Note that Alteryx and Twilio positions are larger than I usually like, but they are very high conviction Category Crushers.

 
Alteryx 		20.4%
Twilio			20.1%
Zscaler		 	12.8%
Okta			10.1%
MongoDB 		 9.1%
The Trade Desk	         7.8%
Elastic			 6.4%
Nutanix 		 4.6%
Square			 2.6%
Abiomed			 2.4%
Vericel			 2.0%
Guardant Health	         2.0%

https://discussion.fool.com/my-portfolio-at-the-end-of-2018-3409…

Looking there, one could as easily have picked Twilio as Alteryx, Zscaler or MongoDB as easily as Okta. Coupa is nowhere and won’t really appear significantly in your holdings until October. And Elastic is there still, though not much longer.

I am not questioning the point you were making, but it did look a bit like cherry picking.

11 Likes
20

The number of ESTC shares doubling in the last 12 m is due to the IPO process. Happens to all companies. Does not mean company issued new stock or market cap of ESTC doubled in last 1 year.

5 Likes