The Datadog stock (NASDAQ:DDOG) has lately sparked analyst interest.
Credit Suisse began coverage of Datadog stock (NASDAQ:DDOG) with an “outperform” rating on Friday. Earlier this week, Sterling Auty of Moffett Nathanson initiated coverage with a “buy” rating and a price target of $143, suggesting a 51.31% potential upside. In addition, middle-market investment bank Robert W. Baird initiated coverage of the stock (NASDAQ:DDOG) with a target price of $120 and a “outperform” rating.
Market Evaluation of Datadog Stock
Since announcing its second-quarter results on August 4, the Datadog stock (NASDAQ:DDOG) has lost momentum. Earnings per share were $0.24, a 167% increase over the previous quarter.
Revenue was $406.14 million, much above the average expectation of $381.28 million. This was a 74% rise year over year.
The company’s profits increased by 80% to 300% in the last five quarters. In the previous eight quarters, revenue increased at high double-digit rates.
Datadog highlighted many new service collaborations and advancements in its earnings announcement. It also said that it had around 2,420 clients with annual recurring revenue of $100,000 or more, a 54% increase over the previous quarter.
Wall Street predicts a profit of $0.80 per share for the whole year, a 67% rise. This is expected to rise 34% to $1.07 per share in 2023.
What caused the Datadog stock to fall?
Obviously, part of the rationale is the same for most stocks: concerns about interest rates, inflation, recession, and a general market downturn.
However, in the case of Datadog, there was some company-specific news that disappointed investors: the company’s outlook was only in line with expectations rather than exceeding them.
Datadog issued the following third-quarter guidance:
Revenue of $410 million to $414 million.
The non-GAAP operating income ranges from $51 million to $55 million.
Net income per share non-GAAP between $0.15 and $0.17
It anticipates the following for the whole year:
Revenue of $1.61 billion to $1.63 billion.
Non-GAAP operating income ranges from $255 to $275 million.
Non-GAAP net income per share ranges from $0.74 to $0.81.
For the whole year, net income is likely to fall short of analyst projections, which would be a huge disappointment.
Nonetheless, Wall Street clearly believes in the company, as seen by the lofty average price target of $148.36, or a potential upside of 67.26%.
Even though it just went public three years ago, Datadog’s market capitalization of $28.30 billion places it among the top corporate software producers in terms of valuation. Salesforce (NYSE: CRM), SAP (NYSE: SAP), ServiceNow (NYSE: NOW), Snowflake (NYSE: SNOW), Workday (NASDAQ: WDAY), and Shopify are all ahead of it (NYSE: SHOP). Several sector rivals have lower valuations, including well-known businesses like Asana (NYSE: ASAN) and Twilio (NYSE: TWLO).
Datadog is an excellent watchlist candidate for the next market rally since it is a relatively young firm in development mode and one that institutions trust.
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Author Okoro Chinedu 
