The market cap of research and advisory company Gartner plunged 28%, or by roughly $9B yesterday, after it reduced its 2025 revenue guidance by $80 million, or a mere 1.2%. Apparently, investors once again forgot that a company’s purpose of existence is not beating Wall Street estimates. It is serving its customers as best as it can in order to grow revenues, profits and cash flows, which Gartner actually does.
But what interests us more here is the fact that Elliott Wave analysis actually helped us predict this stock price collapse more than a year ago.
The chart above was published on July 4th, 2024, in an article titled “Gartner Stock Near the End of the Elliott Wave Road”. The road was, of course, a five-wave impulse, marked (1)-(2)-(3)-(4)-(5), where the sub-waves of (1) and (5) were also visible. According to the theory, a three-wave correction was supposed to begin as soon as wave (5) was over. Downside targets near the support of wave (4) made sense.
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With this pattern in mind, we wrote that “wave 5 of (5) can still exceed the $500 mark, but instead of chasing it, investors should probably start taking profits.” We thought that those who didn’t, risked suffering a drop to “$250 for a 50% decline.” Long story short, this is almost exactly how the situation unfolded.
Gartner reached an all-time high of $584 in February, 2025. The stock has been falling ever since in a decline, which culminated in yesterday’s sharp selloff to $231. The bearish reversal Elliott Wave helped us to predict led to a 60% crash so far in just six months. And the bears might not go away anytime soon.
The problem is that even after the crash, Gartner is still an $18.5B company. Management expects $1.15B in free cash flow this year, which would be enough if Gartner was growing sales much faster than the 2.8% growth it forecasts for 2025. So, in our opinion, the stock is still quite expensive at a P/FCF ratio of 16.
Therefore, we think we’ve only seen wave (a) of a zigzag correction, whose waves (b) up and (c) down have yet to develop. The support of wave (4) might slow the bears down for a while in (b), but wave (c) should eventually drag Gartner to new lows before a hard bottom can be found.
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