We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
3 Key Reasons to Buy Datadog Stock Beyond the 23% Surge in a Year
Read MoreHide Full Article
Datadog (DDOG - Free Report) has caught the attention of investors with its impressive 23% stock price surge over the past year, underperforming the Zacks Computer and Technology sector’s rise of 35.1%. However, savvy investors are looking beyond this short-term gain to identify more substantial reasons for considering Datadog as a long-term investment.
Datadog’s continued ability to capture market share in the growing observability and application performance monitoring sectors is noteworthy. 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.
This article explores three key factors, other than its recent rally, which make Datadog stock an attractive buy.
1-Year Performance
Image Source: Zacks Investment Research
DDOG's Winning Strategy: Cloud Leadership, Clients and AI
Datadog has solidified its position as a leader in the cloud infrastructure market, riding the wave of digital transformation. The company's cloud-based monitoring and analytics platform addresses the growing demand for advanced observability, cloud security and service management solutions. Datadog's strategic partnerships with major cloud providers like Amazon (AMZN - Free Report) -owned Web Services, Google Cloud, Oracle (ORCL - Free Report) and Microsoft (MSFT - Free Report) Azure have strengthened its multi-cloud presence. Recently, Datadog launched Monitoring for Oracle Cloud Infrastructure (OCI), enabling Oracle customers to monitor both cloud-native and traditional workloads on OCI with comprehensive telemetry.
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 boasted 3,390 customers with an annual run rate (ARR) of $100,000 or more, representing a 13% year-over-year increase. These premium customers contributed significantly to Datadog's revenues, accounting for approximately 87% of the total ARR. The company's multi-product strategy has shown strong traction, with 83% of customers using two or more products and 49% utilizing four or more, highlighting successful cross-selling efforts.
Datadog's financial performance has been impressive, with second-quarter revenues growing 26.9% year over year to $611.25 million. For 2024, the company projects revenues between $2.62 billion and $2.63 billion, with non-GAAP earnings expected between $1.62 and $1.66 per share. The Zacks Consensus Estimate for 2024 revenues and earnings is pegged at $2.63 billion and $1.63 per share, respectively. This indicates year-over-year an improvement of 23.4% in the top line and 23.48% in the bottom line. The earnings estimate has moved north by a penny over the past 30 days.
Image Source: Zacks Investment Research
Datadog has demonstrated a clear path to profitability, with gross margins improving by 80 basis points year over year to 82.1% in the second quarter. This combination of high growth and improving financial metrics suggests that Datadog is capturing market share in a sustainable and increasingly profitable manner.
Datadog's commitment to innovation and product development positions it well for future growth. The company has been at the forefront of integrating artificial intelligence and machine learning capabilities into its platform, enhancing its predictive analytics and anomaly detection features. Additionally, Datadog's expansions into areas such as application security and cloud cost management demonstrate its ability to identify and capitalize on adjacent market opportunities. This continuous innovation not only helps retain existing customers but also attracts new ones, driving long-term value creation.
DDOG’s Competitive Landscape and Valuation
Datadog operates in a competitive observability and monitoring market, facing rivals such as New Relic, Dynatrace and Splunk. While Datadog has differentiated itself through its unified platform and multi-cloud integrations, its competitors also offer robust solutions and have established customer bases. Additionally, tech giants like Microsoft and Amazon have their own monitoring tools, potentially posing a threat to Datadog's market share.
Additionally, the company's valuation may be a concern for some investors, as the stock trades at a premium compared to the broader Zacks Internet - Software industry. As of the latest data, Datadog’s forward 12-month P/S ratio hovers around 12.64, reflecting investors' high growth expectations. This valuation is justified by Datadog's strong revenue growth, expanding customer base and increasing product adoption.
DDOG’s P/S F12M Ratio Depicts Stretched Valuation
Image Source: Zacks Investment Research
Conclusion
While the 23% stock price increase over the past year is certainly noteworthy, these three factors — market leadership, strong client base and ongoing innovation — provide a more robust foundation for considering Datadog as a long-term investment. As the demand for observability and security solutions continues to grow in our increasingly digital world, Datadog appears well-positioned to capitalize on these trends and potentially deliver substantial returns to investors willing to look beyond short-term price movements. 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.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
3 Key Reasons to Buy Datadog Stock Beyond the 23% Surge in a Year
Datadog (DDOG - Free Report) has caught the attention of investors with its impressive 23% stock price surge over the past year, underperforming the Zacks Computer and Technology sector’s rise of 35.1%. However, savvy investors are looking beyond this short-term gain to identify more substantial reasons for considering Datadog as a long-term investment.
Datadog’s continued ability to capture market share in the growing observability and application performance monitoring sectors is noteworthy. 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.
This article explores three key factors, other than its recent rally, which make Datadog stock an attractive buy.
1-Year Performance
Image Source: Zacks Investment Research
DDOG's Winning Strategy: Cloud Leadership, Clients and AI
Datadog has solidified its position as a leader in the cloud infrastructure market, riding the wave of digital transformation. The company's cloud-based monitoring and analytics platform addresses the growing demand for advanced observability, cloud security and service management solutions. Datadog's strategic partnerships with major cloud providers like Amazon (AMZN - Free Report) -owned Web Services, Google Cloud, Oracle (ORCL - Free Report) and Microsoft (MSFT - Free Report) Azure have strengthened its multi-cloud presence. Recently, Datadog launched Monitoring for Oracle Cloud Infrastructure (OCI), enabling Oracle customers to monitor both cloud-native and traditional workloads on OCI with comprehensive telemetry.
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 boasted 3,390 customers with an annual run rate (ARR) of $100,000 or more, representing a 13% year-over-year increase. These premium customers contributed significantly to Datadog's revenues, accounting for approximately 87% of the total ARR. The company's multi-product strategy has shown strong traction, with 83% of customers using two or more products and 49% utilizing four or more, highlighting successful cross-selling efforts.
Datadog's financial performance has been impressive, with second-quarter revenues growing 26.9% year over year to $611.25 million. For 2024, the company projects revenues between $2.62 billion and $2.63 billion, with non-GAAP earnings expected between $1.62 and $1.66 per share. The Zacks Consensus Estimate for 2024 revenues and earnings is pegged at $2.63 billion and $1.63 per share, respectively. This indicates year-over-year an improvement of 23.4% in the top line and 23.48% in the bottom line. The earnings estimate has moved north by a penny over the past 30 days.
Image Source: Zacks Investment Research
Datadog has demonstrated a clear path to profitability, with gross margins improving by 80 basis points year over year to 82.1% in the second quarter. This combination of high growth and improving financial metrics suggests that Datadog is capturing market share in a sustainable and increasingly profitable manner.
Datadog's commitment to innovation and product development positions it well for future growth. The company has been at the forefront of integrating artificial intelligence and machine learning capabilities into its platform, enhancing its predictive analytics and anomaly detection features. Additionally, Datadog's expansions into areas such as application security and cloud cost management demonstrate its ability to identify and capitalize on adjacent market opportunities. This continuous innovation not only helps retain existing customers but also attracts new ones, driving long-term value creation.
DDOG’s Competitive Landscape and Valuation
Datadog operates in a competitive observability and monitoring market, facing rivals such as New Relic, Dynatrace and Splunk. While Datadog has differentiated itself through its unified platform and multi-cloud integrations, its competitors also offer robust solutions and have established customer bases. Additionally, tech giants like Microsoft and Amazon have their own monitoring tools, potentially posing a threat to Datadog's market share.
Additionally, the company's valuation may be a concern for some investors, as the stock trades at a premium compared to the broader Zacks Internet - Software industry. As of the latest data, Datadog’s forward 12-month P/S ratio hovers around 12.64, reflecting investors' high growth expectations. This valuation is justified by Datadog's strong revenue growth, expanding customer base and increasing product adoption.
DDOG’s P/S F12M Ratio Depicts Stretched Valuation
Image Source: Zacks Investment Research
Conclusion
While the 23% stock price increase over the past year is certainly noteworthy, these three factors — market leadership, strong client base and ongoing innovation — provide a more robust foundation for considering Datadog as a long-term investment. As the demand for observability and security solutions continues to grow in our increasingly digital world, Datadog appears well-positioned to capitalize on these trends and potentially deliver substantial returns to investors willing to look beyond short-term price movements. 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.