According to Wall Street, shares of Unstoppable Artificial Intelligence (AI) fell by 40% for a hand-over-fist buy.

Artificial intelligence (AI) stocks like Nvidia AND Microsoft is the most common choice for investors looking to profit from this rapidly developing technology. However, the artificial intelligence industry is growing rapidly and opportunities are emerging beyond the most popular names.

Flexible NV (NYSE: ESTC) has developed a portfolio of AI software tools that enable companies to put valuable applications to their data, whether it’s helping employees instantly access internal information or creating new shopping experiences for customers. These tools are attracting an increasing number of high-spending enterprises, which is driving Elastic’s revenue and share price momentum.

The company’s stock is trading 40% below its all-time high, which was set during the 2021 tech frenzy, but is on a recovery path. Wall Street Journal 25 analysts cover the stock and a majority have rated it with the highest possible buy rating. Here’s why investors may want to follow the Street’s lead.

Bringing AI-powered search to businesses of all sizes

In today’s economy, businesses have no choice but to digitize their operations and sales channels, otherwise they risk falling behind the competition. This means moving every valuable customer asset, document and data point into cyberspace, where accessibility becomes a challenge without the right tools.

Elasticsearch software resides on an organization’s internal data. It allows employees to perform a simple query to find the information they need, rather than sifting through thousands of documents or contacting senior management for help. For example, if an employee isn’t familiar with the company’s vacation leave policy, Elasticsearch can instantly retrieve the information for them.

Elasticsearch Relevance Engine (ESRE) enables companies to build generative AI into the Elasticsearch environment, which can improve the quality of each response through better understanding of natural language. Simply put, ESRE can help a company deliver better answers to any query, even if they are simpler or contain fewer words.

Elasticsearch can also be used to power the search functionality of a company’s website, helping customers find products faster. However, ESRE also elevates this experience with artificial intelligence. Let’s say a customer wants to install a fence in their yard. The AI-powered search engine will allow them to enter a query like: “What products and tools do I need to build a 100-foot-long, six-foot-tall wooden fence in California?”

An AI engine with good data will present everything the customer needs – including relevant recipes – so all they need to do is click “buy”. This saves countless hours spent scouring the internet for everything they need, and that’s exactly the level of convenience consumers will soon expect. Therefore, companies that do not use tools like Elasticsearch may be left behind.

Accelerating revenue growth, driven by high-spending customers

Elastic’s fiscal year 2024 ended on April 30. In the fourth and final quarter, the company generated revenue of $335 million, a 20% increase over the year-ago period. This was the fastest pace of growth in over a year and marked the second consecutive quarter of acceleration.

At the end of the fourth quarter, the company had 1,330 customers with an annual contract value of at least $100,000. This was an increase of 60 customers compared to just three months earlier, which was the largest quarterly increase in the entire fiscal year 2024. Additionally, the company recorded a net revenue growth rate of 110%, which meant that existing customers increased their 12-month spending by 10% in the fourth quarter compared to the period a year ago.

The results were particularly impressive considering that Elastic carefully managed costs to improve its bottom line. The company posted net income of $61.7 million for the year, a big difference from its net income of $236.2 million loss in fiscal 2023. It did benefit from a one-time tax credit of $184.4 million, but even if we exclude that, its net loss in fiscal 2024 would still be almost 50% smaller.

On a non-GAAP basis, which excludes one-time and non-cash expenses such as stock-based compensation, Elastic’s net income increased 490% to $123.5 million. The point is that the company is finding a way to deliver faster revenue growth while managing expenses to make significant progress in its financial performance. This means the company doesn’t have to burn a ton of cash to attract new customers and expand its business – a great sign for investors.

Wall Street is very bullish on Elastic stock

Elastic stocks are up 64% over the past 12 months, but remain 40% below their all-time high in 2021. Oceans of pandemic-related stimulus then sent many tech stocks to unrealistic valuations, so the subsequent declines They are not necessarily a sign that something is wrong.

However, the company’s stock is quite cheap compared to many of its peers in the AI ​​space. Based on fiscal 2024 revenues of $1.26 billion and a market capitalization of $11.4 billion, the stock is trading at a price-to-sales (P/S) ratio of 8.9. Here’s how it compares to other popular AI stocks:

NVDA PS Proportion Chart

Additionally, of the 25 analysts tracked by Wall Street Journal, 16 rated Elastic stock with a buy rating and nine gave a hold rating. No one is suggesting selling.

The consensus price target of $128.56 represents an upside of approximately 15% over the next 12-18 months. Elastic could rise significantly in the long term and potentially even surpass its all-time high near $190, based on its attractive valuation and growing demand for AI software.

Investors may want to get in on the action now and buy Elastic stock for the long term.

Is it worth investing $1,000 in Elastic now?

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Anthony Di Pizio has no position in any of the companies mentioned. The Motley Fool covers and recommends Elastic, Microsoft and Nvidia. The Motley Fool recommends and recommends the following options: Long January 2026 $395 Call to Microsoft and Short January 2026 $405 Call to Microsoft. The Motley Fool has a disclosure policy.

1 Unstoppable Artificial Intelligence (AI) Drops 40% to Buy Fist Hand Option, According to Wall Street Originally published by The Motley Fool