We're Trimming Back Exposure to This AI Name Under Pressure

Symbol	Transaction Type	# Shares Traded	Recent Price $	Shares Owned After Trade	% Portfolio
ESTC	Sell	1,283	$75.25	1,000	1.4%

After you receive this alert, we will sell 1,283 shares of Elastic ESTC at or near $75.25. Following the trade, the Portfolio will own 1,000 ESTC shares, roughly 1.4% of the Portfolio.

Elastic shares are under pressure on Thursday, likely stemming from multiple downgrades for Fortinet FTNT shares, which is also weighing on our position in First Trust Nasdaq Cybersecurity ETF CIBR shares. We are also hearing rumblings of layoffs at Elastic, which raises questions about the company’s recently wrapped July quarter. To this, we can add the post-earnings performance of ServiceNow NOW shares, which delivered a beat-and-raise quarter and have since traded off. And, as we discussed with Jay Woods on this week’s "Stocks & Markets" podcast, we are moving deeper into one of the seasonally weakest times of the year for the market.

That combination is leading us to shed ESTC shares, limit our losses, build up our cash position and wait for better opportunities to put that capital to work in better-positioned companies. That likely includes NOW shares, but it could also mean others on the Portfolio’s shopping list or ones we are rolling up our sleeves and doing the work on. CIBR, American Express AXP, and Waste Management WM are some of the other positions on that list, as are TJX Companies TJX shares at the right price.

Could we see a rebound in ESTC shares from their current oversold levels?

It's quite possible, but in our experience, where there is smoke, there tends to be fire, and we’d rather not risk getting burned. However, given the oversold nature of ESTC shares, we are leaving some shares in play. We’re inclined to use any near-term strength to work our way out of them, especially with stiff technical resistance between $84 and $86. However, should ESTC shares move closer to our $72 panic point, that would prompt us to close out the Portfolio’s remaining position toot suite. With that framework, we will downgrade ESTC shares to a Three rating from a One rating.

One question we suspect we may get in response to today’s move is why we’re inclined to sell ESTC shares, but not any for Universal Display OLED?

The simple answer is that the number of data points point to the accelerating adoption of organic light-emitting diode displays. We recapped some of the more recent ones in our June quarter earnings alert, but since then, we’ve seen more conversation around Apple’s pending foldable iPhone and fresh reports that its first Mac with an organic light-emitting diode display will be released next year as well. And as we explained in that earnings alert, we are coming off of the seasonally weakest quarter of the year for many of Universal’s end markets, with all signs pointing to seasonally stronger volumes ahead.

That’s a very different picture than the one we’re seeing with Elastic, and in many respects, it is similar to the one we saw in Marvell MRVL earlier this year. In that case, we continued to follow the data, and MRVL shares have since rebounded meaningfully off their April lows.

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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, CIBR, NOW, AXP, WM, TJX, OLED and MRVL.