We recently published a list of 12 Stocks to Buy with Exponential Growth in 2025. In this article, we are going to take a look at where Datadog, Inc. (NASDAQ:DDOG) stands against other stocks to buy with exponential growth in 2025.
With the Trump administration implementing the tariff agenda, global markets continue to feel the impact, with sell-offs taking place as investors are on their toes due to the implications of a dynamic trade landscape. Morgan Stanley believes that stocks in sectors having increased foreign revenue exposure, including technology, materials and energy, can be more vulnerable to tariff uncertainties. If tariffs remain long-lasting, there is a possibility that defensive stocks in sectors like health care and utilities might outperform cyclicals, including consumer discretionary companies.
Resilient Sectors Amidst Uncertainties
The technology, energy, materials and industrials sectors, having foreign revenue exposure as high as 57%, are especially exposed to tariffs, says Morgan Stanley. For instance, the tariffs targeting aluminum and steel can impact the materials sector, while tariffs specific to China or retaliation efforts can have secondary impacts for broader technology space. If the tariff regime escalates, the firm opines that the utilities and healthcare sectors are expected to outperform because of their defensive nature and lower tariff exposure.
If the long-lasting tariff regime comes into action, the defensive US stocks can outperform cyclical sectors such as industrials or consumer discretionary. This is because cyclical sectors are more vulnerable to higher import costs as well as a reduction in international trade. Furthermore, the consumer discretionary companies that have higher reliance on revenues garnered from lower-income consumers can witness the most pressure.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Amidst Tariffs, What Lies Ahead for US Economy?
The strong consumer spending has been driving the economy, and Dr. David Kelly (Chief Global Strategist at J.P. Morgan Asset Management) anticipates another year of 2% GDP growth. One critical impact of Trump’s immigration policies can be less job growth. Another important focus of the Trump administration revolves around deregulation, which is expected to have positive impacts on investing. Kelly believes that deregulation or lack of additional regulation is expected to help some areas, mainly for financial markets.
There could be an increase in bank lending and private credit. Kelly believes that private equity markets and cryptocurrencies are expected to gain the most from deregulation. The outlook on corporate profitability this year remains significantly good. Kelly opines that there has been a broadening out of profits. Earlier, there were technology companies and the Mag Seven and the like who were making money. Now, in Q4 2024, 9 out of 11 S&P 500 sectors witnessed a gain.
Our Methodology
To list the 12 Stocks to Buy with Exponential Growth in 2025, we used a screener to shortlist the companies that analysts see significant upside to. The stocks were ranked in ascending order of their average upside potential, as of March 14. We also mentioned the hedge fund sentiments around each stock, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A close-up of a laptop with a software engineer coding on the monitor.
Datadog, Inc. (NASDAQ:DDOG)
Average Upside Potential: ~57.1%
Number of Hedge Fund Holders: 83
Datadog, Inc. (NASDAQ:DDOG) operates an observability and security platform for cloud applications. Analyst Mike Cikos from Needham maintained a “Buy” rating on the company’s stock, setting a price objective of $160.00. The analyst’s rating is backed by a combination of factors reflecting the company’s healthy business momentum. As per the analyst, the company continues to experience strong growth, thanks to the industry M&As and a strong focus from customers on optimizing operations. Furthermore, Datadog, Inc. (NASDAQ:DDOG)’s introduction of new offerings, like LLM Observability, has been improving its market presence, with investments in security solutions placing it well to capitalize on the current industry trends.
Datadog, Inc. (NASDAQ:DDOG) remains well-placed to benefit from the strong growth in AI and cloud adoption. Its platform is being used to monitor AI workloads, and the product innovations continue to focus on enhancing observability for LLMs as well as other AI applications. With companies integrating AI into their operations, demand for sophisticated monitoring and observability tools can improve, providing a strong opportunity for Datadog.
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.”
Overall, DDOG ranks 10th on our list of stocks to buy with exponential growth in 2025. While we acknowledge the potential of DDOG as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than DDOG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
