Had two and a half intensely focused and fun days to get up to speed with Elastic ( $ESTC ). Have been reading all calls, SA articles, many dozens of Slideshare presentations, various blog posts, skimmed prospectus, 10k & DEF 14A and watched many presentations on YouTube.
Elastic is highly interesting, spending time learning about it, I believe, has great ROI on your time.
Best resources:
Most useful blog post I've found is this one by @StackInvesting. softwarestackinvesting.com/elastic-estc-s… - Can recommend to check out their A+ work & to follow them on Twitter!
Best resources:
Most useful blog post I've found is this one by @StackInvesting. softwarestackinvesting.com/elastic-estc-s… - Can recommend to check out their A+ work & to follow them on Twitter!
Useful $ESTC YouTube vids with imo high time-ROI:
overview: &
youtube.com/channel/UCUaTR…
CEO Shay Banon about SIEM, Endpoint Security:
Keeping Up with the ELK Stack: Elasticsearch, Kibana, Beats, & Logstash:
overview: &
youtube.com/channel/UCUaTR…
CEO Shay Banon about SIEM, Endpoint Security:
Keeping Up with the ELK Stack: Elasticsearch, Kibana, Beats, & Logstash:
High quality people on Twitter that I'm aware of that have been writing, thinking & discussing Elastic:
@GreenhavenRoad in their Q4 letter:
and @MinionCapital, @CrowdedTradeCap, @LibertyRPF @mspacey4415 @LSValue, @afc.
@GreenhavenRoad in their Q4 letter:
and @MinionCapital, @CrowdedTradeCap, @LibertyRPF @mspacey4415 @LSValue, @afc.
This tweet is spot on btw:
"Super app" is currently one of my most important investment filters.
"Super app ecosystem" is the key to my heart.
But "Super software infrastructure ecosystem" would work for me, too.
"Digital superhighway" - not anymore.
"Super app" is currently one of my most important investment filters.
"Super app ecosystem" is the key to my heart.
But "Super software infrastructure ecosystem" would work for me, too.
"Digital superhighway" - not anymore.
Favorite high level pictures what Elastic is all about: 
Everything gets "smart" & securitized, thus everything gets logged, gets monitored, gets analyzed, visualized, secured and becomes searchable & information.
"We are the most popular, best product out there today, when it comes to storing logs, in any environment" - Shay Banon
"We are the most popular, best product out there today, when it comes to storing logs, in any environment" - Shay Banon
In any environment is important.
"The whole world is now a computer" - Satya Nadella
TAM of search = infinite game.
Logging is how humanity is archiving. It's a core tech what makes us human.
No spaceship SciFi stuff without the need to put something into "log entry" format.
"The whole world is now a computer" - Satya Nadella
TAM of search = infinite game.
Logging is how humanity is archiving. It's a core tech what makes us human.
No spaceship SciFi stuff without the need to put something into "log entry" format.
Mental model: Swiss army knife.
Small step to the idea that machine learning is a new technology/layer/foundation (like electricity, internet, mobile, clouds) on top of which priorly existing things get completely rebuilt via the lense of machine learning as the new core technology.
"Pay for the data you use" for everything in the Elasticstack is a nice, unified resource-based pricing system that aligns with customers by making them pay less.
Results in tax efficient compounding because you're constantly sharing scale benefits at breakeven during growth.
Results in tax efficient compounding because you're constantly sharing scale benefits at breakeven during growth.
I think sth almost nobody understands, and probably I'm giving away WAY too much free value & secret sauce here, is that earnings indeed matter little, whilst future earnings power matters much more.
"Net profit" isn't fully real when certain entities just print profits.
Imho.
"Net profit" isn't fully real when certain entities just print profits.
Imho.
pattern recognition:
Amazon: "it is always day 1"
Elastic: "it is always Day 0"
Btw, I've always told people that we're "still day -1".
Something hasn't started yet. We're mortals, our epistemology & logic itself is limited by death.
(But that's not v important here, read on.)
Amazon: "it is always day 1"
Elastic: "it is always Day 0"
Btw, I've always told people that we're "still day -1".
Something hasn't started yet. We're mortals, our epistemology & logic itself is limited by death.
(But that's not v important here, read on.)
As an investor, you essentially want all your companies to have some stance on Amazon's godly insight of "always day 1". It's a big positive that Elastic does that.
Are there other companies out there that have a philosophy about this?
I take this seriously, would love to know.
Are there other companies out there that have a philosophy about this?
I take this seriously, would love to know.
From an investor's standpoint "integrations manager" can be seen as an app store where everything is free & that it being monetized by other means.
Ecosystem gets taxed but not via app store model, even though it's just as valuable like other platforms where stuff is built for.
Ecosystem gets taxed but not via app store model, even though it's just as valuable like other platforms where stuff is built for.
What do I like about Founder & CEO Shay Banon?
* customer-obsessed, one notices this in the details
* high-energy
* smiling a lot (lots of highly intelligent people smile unusually often, e.g. Bill Gates)
* technical founder into CEO role transition (Benchmark view on great CEOs)
* customer-obsessed, one notices this in the details
* high-energy
* smiling a lot (lots of highly intelligent people smile unusually often, e.g. Bill Gates)
* technical founder into CEO role transition (Benchmark view on great CEOs)
* thinks about compounding constantly.
(We can agree that the idea of compounding is so important that it's worth highlighting. If you know just how much long-term performance comes from small number of companies, you better buy companies with CEOs that understand compounding!)
(We can agree that the idea of compounding is so important that it's worth highlighting. If you know just how much long-term performance comes from small number of companies, you better buy companies with CEOs that understand compounding!)
Speed of execution of this company is top notch.
"speed, scale, relevance"
Time value of money -> Acceleration of everything.
Every business gradually is resembling what has been the high-frequency trader decades ago. (mental model)
Elastic introduced nano-second data type...
"speed, scale, relevance"
Time value of money -> Acceleration of everything.
Every business gradually is resembling what has been the high-frequency trader decades ago. (mental model)
Elastic introduced nano-second data type...
I view this philosophically...
I think the business that is introducing 10⁻⁹ scale has a good chance to be fast, strong and special.
World gets faster and faster? Elastic helps to drive this (efficiency) & benefits from it.
Mission: "zero latency"
I think the business that is introducing 10⁻⁹ scale has a good chance to be fast, strong and special.
World gets faster and faster? Elastic helps to drive this (efficiency) & benefits from it.
Mission: "zero latency"
Picture that hints why I'm long $TCEHY and $BABA (currently via $SFTBY).
Think many western investors need to see a cutting edge company like Elastic show these five companies on the same slide...
Think many western investors need to see a cutting edge company like Elastic show these five companies on the same slide...
CFO Janesh Moorjani:
In my opinion (2.5 years of experience, couple thousand companies analysed), there are v few CFOs who talk about being "good stewards of capital" & managing dilution well.
-> sign of quality
If you think that's common fake lingo: not true. My experience.
In my opinion (2.5 years of experience, couple thousand companies analysed), there are v few CFOs who talk about being "good stewards of capital" & managing dilution well.
-> sign of quality
If you think that's common fake lingo: not true. My experience.
Couple things to consider about Elastic:
* security libraries seen as network effect
* (Live) visualization via Elastic Canvas is not only relevant for IT stuff, but principally for any data.
* live business data = universal use case
* seems strong w/ government & institutions
* security libraries seen as network effect
* (Live) visualization via Elastic Canvas is not only relevant for IT stuff, but principally for any data.
* live business data = universal use case
* seems strong w/ government & institutions
Waves to surf:
Search, Moore's Law, Data Usage, App & API Economy, Open Source & Developer communities, Connection between smallest things & clouds, Observability (= Accountability of systems), Re-bundling of too fragmented spaces (e.g. APM), Digital Super Infrastructures, SaaS.
Search, Moore's Law, Data Usage, App & API Economy, Open Source & Developer communities, Connection between smallest things & clouds, Observability (= Accountability of systems), Re-bundling of too fragmented spaces (e.g. APM), Digital Super Infrastructures, SaaS.
Sth not to like? They guide for 82.5mn shares out next Q at midpoint, but there's quite some option dilution that's still out. Thus I peg current mcap at $5bn at $50 per share, that's just how I personally and generally (conservatively) operate. You're free to use 82.5mn, ofc...
1) Not on VIC yet.
2) Hardly any deep dive SA articles yet.
3) Seems not very well known by FinTwit?
4) E.g. Glynn, Sylebra, Benchmark, Greenhaven, Tiger Global, Atreides own it. Whale Rock sold out.
5) Shay Banon at 9.4mn shares, Steven Schuurman at 11.8mn (ex options) ->skin...
2) Hardly any deep dive SA articles yet.
3) Seems not very well known by FinTwit?
4) E.g. Glynn, Sylebra, Benchmark, Greenhaven, Tiger Global, Atreides own it. Whale Rock sold out.
5) Shay Banon at 9.4mn shares, Steven Schuurman at 11.8mn (ex options) ->skin...
Have been long a tracking position since 2019, bought more last week, still lower than 1% of my portfolio. Would like it to be ~1% for now. Have secretly been studying everything SaaS since 8 or 9 months (still a noob), but no way I could own more than 1% here, bc I had to study
at least $CRWD, $DDOG, $SPLK, mb $DT, $NEWR just as much as $ESTC...
I mean, I'm trying to actually follow everything, but in-depth research needs weekends.
Market currently bit too hectic for my taste to focus on one thing for days.
I mean, I'm trying to actually follow everything, but in-depth research needs weekends.
Market currently bit too hectic for my taste to focus on one thing for days.
$ESTC valuation? The longer I'm into investing, the less important it seems to me to spit out a number. It really is the least important thing in contrast to that valuation seems common-sense reasonable here & that Elastic seems like a great shareholder-company.
If you want a number anyway:
Let's say above $106.193 sometimes in the next 4y, consistently so after 5y.
(slight irony)
But for real, at $106.193, Shay Banon would be a billionaire based on his direct share ownership ex options.
I care about incentives, not DCFs.
Let's say above $106.193 sometimes in the next 4y, consistently so after 5y.
(slight irony)
But for real, at $106.193, Shay Banon would be a billionaire based on his direct share ownership ex options.
I care about incentives, not DCFs.
If we say 120mn shares out in 4y and $106.193 share price, that's a market cap of $12.743bn. >30x FCF based on its then more evident potential power to earn $424.772mn in FCF, this roughly implies having in earnings power what currently is revenue.
Seems feasable to me.
Seems feasable to me.
But even talking about price targets makes me cringe at this point. It's just too elusive, too static. It's abstract. The opposite is trying to look at the company and comparing it to other companies. That way, Elastic seems like a good probability market-beating investment.
On a personal note, when I knew nothing about investing I started by crawling the internet with the term "upside target".
Clearly, now I see how futile and dangerous this was.
Mostly bad companies have upside targets.
Best companies' actual fair value always is shamefully high.
Clearly, now I see how futile and dangerous this was.
Mostly bad companies have upside targets.
Best companies' actual fair value always is shamefully high.
Of course, I have no idea if Elastic is a wonderful company. Looks at least ownable to me though, but what do I know?
The kind of company where more risk comes from timing & CAGR versus total loss? Tech seems so cool...
Thanks for reading! Thanks for feedback, if you like!
The kind of company where more risk comes from timing & CAGR versus total loss? Tech seems so cool...
Thanks for reading! Thanks for feedback, if you like!
