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Datadog Rides the Cloud Wave: Should You Buy, Sell, or Hold the Stock?
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Datadog's (DDOG - Free Report) continued ability to capture market share in the growing observability and application performance monitoring sectors has prompted investors to reassess the company's potential as a long-term investment even though the stock has underperformed its sector in the past year. The stock has returned 23.7% in the past year compared with the Zacks Computer and Technology sector’s growth of 32.5%. The platform's ability to provide unified insights across cloud environments gives it an edge over competitors.
The company's commitment to innovation has been a driving force behind its success. By consistently expanding its portfolio with cutting-edge features such as serverless monitoring, real user monitoring and security monitoring, Datadog has demonstrated its ability to stay ahead of evolving customer needs. This focus on product development has not only helped the company maintain its competitive edge but has also contributed to its growing market recognition.
1-Year Performance
Image Source: Zacks Investment Research
Datadog Strategic Growth in the Cloud Ecosystem
Datadog has established itself as a frontrunner in the cloud infrastructure market, capitalizing on the ongoing digital transformation trend. The company's cloud-based monitoring and analytics platform addresses the increasing demand for advanced observability, cloud security and service management solutions, positioning Datadog at the forefront of the rapidly evolving cloud landscape.
A key indicator of Datadog's success is its ability to attract and retain high-value clients. As of the second quarter of 2024, the company had 3,390 customers with an annual run rate (ARR) of $100,000 or more, marking a 13% year-over-year increase. These premium customers contributed significantly to Datadog's revenues, accounting for approximately 87% of the total ARR.
Datadog's multi-product strategy has shown strong traction, with 83% of customers using two or more products as of June 30, 2024, up from 82% in the year-ago quarter. More impressively, 49% of customers now utilize four or more products, compared to 45% in the year-ago quarter, highlighting successful cross-selling and upselling efforts.
Strategic partnerships with major cloud providers, including Amazon (AMZN - Free Report) -owned Amazon Web Services (AWS), Alphabet (GOOGL - Free Report) -owned Google Cloud, and Microsoft (MSFT - Free Report) Azure, have further solidified Datadog's position in the multi-cloud landscape. As an AWS Partner Network Advanced Technology Partner, Datadog offers seamless integration with AWS infrastructure. Similar deep integrations exist with Google Cloud and Microsoft Azure, enhancing observability and security capabilities across these platforms.
Datadog's multi-cloud, multi-vendor approach allows customers to monitor their entire cloud infrastructure from a single platform, regardless of their chosen cloud providers. This unified view enables organizations to optimize performance, troubleshoot issues and maintain robust security across diverse cloud environments, making Datadog an increasingly indispensable tool in the modern IT stack.
Datadog Stock: Justified Premium or Risky Bet?
Datadog operates in the competitive observability and monitoring market, facing established rivals like New Relic, Dynatrace and Splunk. While Datadog has distinguished itself through its unified platform and multi-cloud integrations, competitors offer robust alternatives with established customer bases. The landscape is further complicated by tech giants like Microsoft and Amazon, whose in-house monitoring tools could potentially erode Datadog's market share.
Investor sentiment reflects high growth expectations, with Datadog's stock trading at a premium compared to the broader Zacks Internet - Software industry. The company's forward 12-month P/S ratio is approximately 13.1.
DDOG’s P/S F12M Ratio Depicts Stretched Valuation
Image Source: Zacks Investment Research
This valuation, while steep, is supported by Datadog's strong revenue growth, expanding customer base and increasing product adoption. In the second quarter, the company reported revenue growth of 26.9% year over year, reaching $611.25 million.
For 2024, DDOG expects revenues between $2.62 billion and $2.63 billion. Non-GAAP earnings are projected between $1.62 and $1.66 per share. Non-GAAP operating income is expected in the range of $620-$630 million.
The Zacks Consensus Estimate for 2024 revenues and earnings is pegged at $2.62 billion and $1.62 per share, respectively. This indicates year-over-year an improvement of 23.3% in the top line and 22.73% in the bottom line. The earnings estimate has moved north by 5.2% over the past 30 days.
Image Source: Zacks Investment Research
DDOG stock currently carries a Zacks Rank #2 (Buy) and has a Growth Score of A, a combination that indicates a good investment opportunity, per the Zacks proprietary quantitative model.
By forging strategic partnerships with industry leaders like Amazon, Google, and Microsoft, Datadog has positioned itself as a trusted ally for organizations navigating complex cloud architectures. This strategic alignment, coupled with its robust product offerings, positions Datadog for continued growth and success in the evolving cloud monitoring and analytics market despite fierce competition and high investor expectations.
Datadog's comprehensive observability solutions across diverse cloud environments align well with the growing trend of multi-cloud and hybrid cloud adoption, making the stock worth buying in the near term.
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Datadog Rides the Cloud Wave: Should You Buy, Sell, or Hold the Stock?
Datadog's (DDOG - Free Report) continued ability to capture market share in the growing observability and application performance monitoring sectors has prompted investors to reassess the company's potential as a long-term investment even though the stock has underperformed its sector in the past year. The stock has returned 23.7% in the past year compared with the Zacks Computer and Technology sector’s growth of 32.5%. The platform's ability to provide unified insights across cloud environments gives it an edge over competitors.
The company's commitment to innovation has been a driving force behind its success. By consistently expanding its portfolio with cutting-edge features such as serverless monitoring, real user monitoring and security monitoring, Datadog has demonstrated its ability to stay ahead of evolving customer needs. This focus on product development has not only helped the company maintain its competitive edge but has also contributed to its growing market recognition.
1-Year Performance
Image Source: Zacks Investment Research
Datadog Strategic Growth in the Cloud Ecosystem
Datadog has established itself as a frontrunner in the cloud infrastructure market, capitalizing on the ongoing digital transformation trend. The company's cloud-based monitoring and analytics platform addresses the increasing demand for advanced observability, cloud security and service management solutions, positioning Datadog at the forefront of the rapidly evolving cloud landscape.
A key indicator of Datadog's success is its ability to attract and retain high-value clients. As of the second quarter of 2024, the company had 3,390 customers with an annual run rate (ARR) of $100,000 or more, marking a 13% year-over-year increase. These premium customers contributed significantly to Datadog's revenues, accounting for approximately 87% of the total ARR.
Datadog's multi-product strategy has shown strong traction, with 83% of customers using two or more products as of June 30, 2024, up from 82% in the year-ago quarter. More impressively, 49% of customers now utilize four or more products, compared to 45% in the year-ago quarter, highlighting successful cross-selling and upselling efforts.
Strategic partnerships with major cloud providers, including Amazon (AMZN - Free Report) -owned Amazon Web Services (AWS), Alphabet (GOOGL - Free Report) -owned Google Cloud, and Microsoft (MSFT - Free Report) Azure, have further solidified Datadog's position in the multi-cloud landscape. As an AWS Partner Network Advanced Technology Partner, Datadog offers seamless integration with AWS infrastructure. Similar deep integrations exist with Google Cloud and Microsoft Azure, enhancing observability and security capabilities across these platforms.
Datadog's multi-cloud, multi-vendor approach allows customers to monitor their entire cloud infrastructure from a single platform, regardless of their chosen cloud providers. This unified view enables organizations to optimize performance, troubleshoot issues and maintain robust security across diverse cloud environments, making Datadog an increasingly indispensable tool in the modern IT stack.
Datadog Stock: Justified Premium or Risky Bet?
Datadog operates in the competitive observability and monitoring market, facing established rivals like New Relic, Dynatrace and Splunk. While Datadog has distinguished itself through its unified platform and multi-cloud integrations, competitors offer robust alternatives with established customer bases. The landscape is further complicated by tech giants like Microsoft and Amazon, whose in-house monitoring tools could potentially erode Datadog's market share.
Investor sentiment reflects high growth expectations, with Datadog's stock trading at a premium compared to the broader Zacks Internet - Software industry. The company's forward 12-month P/S ratio is approximately 13.1.
DDOG’s P/S F12M Ratio Depicts Stretched Valuation
Image Source: Zacks Investment Research
This valuation, while steep, is supported by Datadog's strong revenue growth, expanding customer base and increasing product adoption. In the second quarter, the company reported revenue growth of 26.9% year over year, reaching $611.25 million.
For 2024, DDOG expects revenues between $2.62 billion and $2.63 billion. Non-GAAP earnings are projected between $1.62 and $1.66 per share. Non-GAAP operating income is expected in the range of $620-$630 million.
The Zacks Consensus Estimate for 2024 revenues and earnings is pegged at $2.62 billion and $1.62 per share, respectively. This indicates year-over-year an improvement of 23.3% in the top line and 22.73% in the bottom line. The earnings estimate has moved north by 5.2% over the past 30 days.
Image Source: Zacks Investment Research
DDOG stock currently carries a Zacks Rank #2 (Buy) and has a Growth Score of A, a combination that indicates a good investment opportunity, per the Zacks proprietary quantitative model.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Conclusion
By forging strategic partnerships with industry leaders like Amazon, Google, and Microsoft, Datadog has positioned itself as a trusted ally for organizations navigating complex cloud architectures. This strategic alignment, coupled with its robust product offerings, positions Datadog for continued growth and success in the evolving cloud monitoring and analytics market despite fierce competition and high investor expectations.
Datadog's comprehensive observability solutions across diverse cloud environments align well with the growing trend of multi-cloud and hybrid cloud adoption, making the stock worth buying in the near term.