Morgan Stanley Downgrades Elastic (ESTC) to Equal Weight, Lowers Target
Morgan Stanley downgraded Elastic (ESTC) from Overweight to Equal Weight and lowered its price target from $73 to $66, noting that the company's AI-powered search business is growing slower than expected compared to rivals.
Key Numbers
Shares of Elastic (NYSE:ESTC) fell 4.4% in the afternoon session after Morgan Stanley downgraded the stock from "Overweight" to "Equal Weight" and lowered its price target from $73 to $66. The firm noted that Elastic's AI-driven search business is taking longer to grow than anticipated, while competing data infrastructure companies are already showing AI-related benefits.
Rating Change
- Previous Rating: Overweight
- New Rating: Equal Weight
- Previous Price Target: $73
- New Price Target: $66
Analyst Rationale
Morgan Stanley highlighted that Elastic faces challenges in achieving expected growth from its AI search capabilities. In contrast, companies like Palo Alto Networks (PANW), CrowdStrike (CRWD), and Datadog (DDOG) have demonstrated faster AI adoption, putting Elastic at a competitive disadvantage.
Context
Elastic did not immediately comment on the report. The downgrade follows a period of mixed stock performance, with the company facing increasing competitive pressures in the data and security sectors.
What to Make of It
The downgrade reflects concerns about Elastic's ability to capitalize on the AI trend as quickly as its peers. Investors are advised to monitor upcoming earnings reports to assess the company's progress in this area.
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