6) Datadog, Inc. (NASDAQ:DDOG)
Average Upside Potential: ~37.2%
Number of Hedge Fund Holders: 83
Datadog, Inc. (NASDAQ:DDOG) is a technology company that specializes in cloud-based monitoring, analytics, and security for modern IT infrastructure. Analyst Andrew Sherman of TD Cowen reiterated a “Buy” rating on the company’s stock, providing a price target of $165.00. The strong performance and promising outlook continue to support the analyst’s buy rating. The analyst has deemed Datadog, Inc. (NASDAQ:DDOG)’s commentary on AI-native systems, log solutions, and sales capacity expansion as optimistic, highlighting further growth potential.
Additionally, the analyst sees revenue guidance as conservative, reflecting strong upside, and noted that the sales and marketing expenses are projected to increase as Datadog, Inc. (NASDAQ:DDOG) ramps up hiring, highlighting robust demand. The management’s emphasis on AI-native solutions and competitive advantages in log management continues to play a crucial role in the favourable outlook. Datadog, Inc. (NASDAQ:DDOG) remains well-placed to benefit from favourable technological trends, including expansion of cloud computing, DevOps, and AI adoption, which continue to fuel demand for real-time monitoring, security and observability solutions.
Brown Capital Management, an investment management company, released its Q3 2024 investor letter. Here is what the fund said:
“Other examples of negative sentiment include portfolio companies that reported earnings that met or exceeded expectations, but only saw their share prices go up slightly, stay flat or even decline. For example, Datadog, Inc. (NASDAQ:DDOG) is a leading SaaS-based, information technology (IT)-monitoring and analytics software platform for developers, IT operations and business users. The platform automates the monitoring of infrastructure, applications databases, networks, logs and security. Datadog’s platform is differentiated by providing a unified view of these systems via a visual interface configured to the needs of each user (i.e., a single pane of glass). Datadog delivered solid operating results in the second quarter of 2024, reporting revenue growth of 27% and raising 2024 full year revenue, operating income and earnings guidance. Despite these solid fundamental results, Datadog’s share price was down 11.8% in the third quarter. We speculate that these market reactions are evidence of the negative environment for high-growth companies. For more, please see the Detractors section below.
Datadog, mentioned above, automates the monitoring of infrastructure, applications databases, networks, logs and security. The company delivered solid operating results in the second quarter of 2024, reporting revenue growth of 27% and raising guidance for 2024 full-year revenue, operating income and earnings. Datadog noted improving consumption and demand trends among its enterprise customers and stabilizing trends among its small and mid-sized customers. On its earnings call, Datadog management disputed that it has interest in large acquisitions, notwithstanding news articles on July 17 that Gitlab was seeking a buyer and Datadog is among the potential suitors. Despite solid fundamental results, Datadog’s share price underperformed in the third quarter of 2024. This may be due to its premium valuation and investor worries about Datadog’s ability to sustain its current strong revenue growth in a softer economic environment. We remain confident in Datadog’s ability to deliver durable growth over the long term. We believe Datadog has a massive and underpenetrated total addressable market that is growing about 10% annually. We also believe Datadog has a strong competitive positioning in infrastructure monitoring and is gaining market share.”
