We recently compiled a list of the 15 Best Growth Stocks to Buy for the Next 5 Years. In this article, we are going to take a look at where Elastic NV (NYSE:ESTC) stands against the other growth stocks.
Kevin Mahn, President & CIO at Hennion & Walsh Asset Management, recently appeared on CNBC on January 6 to discuss the current market momentum and emphasize the need for investors to be selective in 2025 to find growth opportunities. He highlighted that while the MAG7 have led the market recently, their leadership may not continue. Mahn referenced historical data, noting that since 1950, there have been nine instances where the market rallied by 20% or more, with the market rising in eight of those cases. However, he pointed out that gains in the following year averaged only 3.6%, indicating a need for careful selection. He also acknowledged recent market trends, including a decline in the S&P 500’s performance and a potential shift in investor sentiment following events like the Santa Claus Rally.
He predicted a path of lower interest rates, expecting 50 basis points of cuts this year instead of the previously anticipated 100 basis points. Mahn suggested that this environment would create favorable conditions for stocks and bonds but urged investors to diversify beyond mega-cap tech stocks into sectors like biotech and aerospace. Earlier on January 3 as well, Mahn noted that after two consecutive years of gains, a third year of strong performance appears unlikely. He remarked that it seems the Grinch got in the way of the Santa Claus rally this year.
He also addressed concerns from investors tempted to time the market or sell their holdings. He warned against trying to time the market, describing it as often futile. Instead, he advocated for rebalancing portfolios to align with long-term goals and risk tolerance. He suggested that the economic landscape is changing, with lower interest rates and stagnant economic growth expected moving forward. Mahn advised investors to take profits from sectors that previously led the market and consider reallocating those funds into different areas poised for future growth. He highlighted biotech as a promising sector, noting bipartisan agreement on the need to lower drug prices. This shift could lead large-cap pharmaceutical companies to seek new revenue sources, making smaller biotech firms attractive.
Methodology
We first sifted through online rankings, and internet lists to compile a list of the top growth stocks to buy for the next 5 years. We then selected the stocks with high 5-year revenue growth and high analysts’ upside potential. From those we picked 15 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A group of software engineers working in an open, futuristic office.
Elastic NV (NYSE:ESTC)
Number of Hedge Fund Holders: 47
5-Year Revenue CAGR: 32.08%
Upside Potential as of January 15: 32.70%
Elastic NV (NYSE:ESTC) is an AI-powered search company that provides cloud-based solutions for data search, analysis, and visualization. Its platform helps businesses effectively manage structured and unstructured data across diverse environments.
In FQ2 2025, the company’s total revenue increased by 18% year-over-year. This was driven by the increasing demand for its Elastic Search AI Platform, which helps businesses extract valuable insights from their data using powerful search and AI/ML tools. It’s available both as a cloud service and for companies to manage themselves. It allows users to securely store and access huge amounts of data, easily find patterns, and gain valuable insights. The platform also includes an easy-to-use interface with tools for visualizing data.
Elastic Cloud, the company’s cloud-based offering, demonstrated a 25% year-over-year revenue increase in FQ2. This reflects the growing reliance of businesses on cloud technologies and the increasing demand for scalable and on-demand access to data and analytics solutions, including those powered by GenAI. As digital transformation continues to accelerate, Elastic NV (NYSE:ESTC) recognizes the need for organizations to integrate search and AI/ML capabilities across their entire operations.
On 16 December 2024, Morgan Stanley initiated coverage on the company with an Overweight rating and a $130 price target due to the growing adoption of GenAI by enterprises. Subsequently, on 21 December 2024, Morgan Stanley highlighted the company as a key beneficiary of GenAI momentum again. Artisan Global Discovery Fund initiated a new position in the company recently, due to trust in its its search and AI solutions, which position it well for the rise of GenAI. It stated the following regarding Elastic NV (NYSE:ESTC) in its Q2 2024 investor letter:
“During the quarter, we initiated new GardenSM positions in Liberty Formula One, Elastic N.V. (NYSE:ESTC) and Onto Innovation. Elastic is a software company that specializes in search and data analysis solutions. Elastic’s search, observability and security solutions are built on the Elastic Search AI Platform, which thousands of companies use, including more than 50% of the Fortune 500. Customers use the software to gain visibility into their data, reduce mean-time-to-resolution and drive actionable outcomes. We believe the company will benefit from the rise of generative artificial intelligence (AI). It provides a differentiated offering due to the combination of a unique pricing model based on consumption, products that handle numerous data types and volumes, and an open architecture environment that offers generative AI development flexibility.”
Overall ESTC ranks 12th on our list of the best growth stocks to buy for the next 5 years. As we acknowledge the growth potential of ESTC as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ESTC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.
