Closing Out Our Position in This AI Software Play
Given a seasonally weak market, we’ll build up our cash and wait for new opportunities.
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| Symbol | Transaction Type | # Shares Traded | Recent Price $ | Shares Owned After Trade | % Portfolio |
|---|---|---|---|---|---|
ESTC | Sell | 1,000 | $73 | 0 | 0% |
After you receive this alert, we will sell the remaining 1,000 shares of Elastic NV ESTC at or near $73. This will close out the remainder of the Portfolio’s ESTC position with a loss near 15%.
Following our move on Thursday to reduce the Portfolio's exposure to ESTC shares as well as our rating downgrade, the shares have moved closer to our $72 panic point. Given chatter of layoffs inside the company, potentially including the chief marketing officer, as the company comes off its July 31 quarter close, the concern we have is that Elastic could underdeliver when it reports the quarter later this month.
We’ve discussed this ample times in the last few weeks that companies that deliver quarterly results or guidance that fall short of market expectations even slightly are seeing their stocks get hammered. Given the potential for that to happen when Elastic reports, we’re opting to fully cut ties with the shares. As we move forward, ESTC shares could rebound, but as we discussed on Thursday, they face considerable resistance between $84 and $86.
Our preference is to redeploy the returned capital in better-positioned companies. ServiceNow NOW, American Express AXP and Waste Management WM are some of those under consideration, as are TJX Companies TJX shares at the right price, but they aren't the only ones. Recognizing the seasonal weakness for the market in August and September, we will not rush to make such moves.
Next week, we intend on sharing a stocktopsy of our position in ESTC shares.
More Pro Portfolio
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(Please note that we are looking to execute these trades at or near the share price mentioned above. Once the trade is completed, subscribers can see the trade's executed price here. Be sure to toggle the “+” next to the position’s ticker to sort Purchase and Date data.)
At the time of publication, TheStreet Pro Portfolio was long ESTC, NOW, AXP, WM and TJX.
