WHAT TO DO NOW: Not much has changed today vs. our update last night when it comes to the market, but after a couple of positive earnings reactions this week, today brought a downer—Elastic (ESTC) is getting hit after a good-not-great report. It’s not a complete meltdown given the recent move, but we’re going to sell half our position and see how the stock acts from here. Our cash position will now be around 33%.
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As of this morning, the major indexes are relatively quiet, with the S&P 500 up 0.1% and the Nasdaq up 0.2%.
There’s obviously nothing new with the market from yesterday’s update—most of the evidence is bullish, but we’re being selective on the buy side and taking things on a stock-by-stock basis given that few stocks are at great entry points … though this week has seen more names settle down or react well to earnings reports, which is a plus.
Today, though, after a couple of positive post-earnings moves, we saw one head in the other direction: Elastic (ESTC) reported a fine quarter, but it was “only” a bit above estimates and guidance was essentially in-line with estimates. Vaguely similar to what we saw with Arista, the AI angle here looks promising over time, but for now the core business is the main draw, which was disappointing in a sense, leading to today’s drop.
Looking at the chart, ESTC isn’t a total disaster—the stock is still well above its early-January low (near 103) and is still in the range from its prior post-earnings highs in December. That said, (a) shares have clearly sliced their 50-day line, and (b) today’s move has wiped away our modest profit.
Could today be a quick shakeout that leads to higher prices? We’re obviously all for that, but given the action today and in recent weeks (lots of resistance in the 130 to 135 area), we’re going to sell half our stake. SELL HALF OF ESTC, HOLD THE REST
We’ll hold the cash for now, but are aiming to redeploy it and do some new buying next week if things hold together.
Don’t hesitate to email me directly at mike@cabotwealth.com with any questions.
