1 Overlooked Artificial Intelligence (AI) Stock Down 54% to Buy Hand Over Fist, According to Wall Street

Core Insights - Elastic N.V. is leveraging AI software products to help businesses manage and extract value from their data, with increasing demand driving revenue growth [2][3] - The stock is currently 54% below its 2021 peak, but analysts are generally optimistic, with a majority recommending a buy [3][12] Company Overview - Elastic has developed Elasticsearch, a tool that allows employees to perform natural language searches on internal data, improving efficiency in information retrieval [5] - The company introduced Search AI, enhancing user experience by integrating generative AI into Elasticsearch, which improves response quality and speed [6] Market Context - The International Data Corporation reports that approximately 480 exabytes of new data are generated daily, highlighting the challenges businesses face in data management [4] - The AI sector is rapidly expanding, with significant opportunities for companies like Elastic to provide productivity-enhancing tools [15] Financial Performance - In Q1 of fiscal 2026, Elastic reported $415 million in revenue, a 20% increase year-over-year, surpassing management's forecast [8] - The company had 1,550 customers with annual contracts exceeding $100,000, indicating strong demand from large organizations [9] - Operating expenses increased by only 13% year-over-year, leading to a reduced net loss of $24.6 million compared to $49.2 million in the previous year [10] - On a non-GAAP basis, Elastic achieved profitability of $64.8 million, a 74% increase from the prior year [11] Analyst Sentiment - Among 30 analysts covering Elastic, 19 have a buy rating, with an average price target of $119.91, suggesting a potential upside of 42% [12] - The highest target of $150 indicates a possible 77% increase, reflecting confidence in the company's growth trajectory [12][13] Valuation Insights - Elastic's price-to-sales (P/S) ratio has decreased from nearly 30 in 2021 to 5.7, making it more attractively valued compared to its historical levels [13] - The long-term growth potential in the AI software market, estimated at $13 trillion by 2030, supports the bullish outlook for Elastic [15]