The Major Catalysts for This
Positive Analysts Input.....
Morgan Stanley raised their stock price forecast on Datadog Inc, a
monitoring and security platform for cloud applications, to $120 from $112 and
said there were several positives out of Q4 earnings that suggest that the New
York City-based company is emerging out of the rough patch seen in the summer
“Closing 2020 with 56% rev growth
supported by customer expansion returning to pre-pandemic levels and record new
logo additions suggests momentum heading into 2021. However, initial guidance
calling for 37-38% growth, while conservative, likely isn’t enough to fuel
shares higher at 34x CY22 sales,” wrote Sanjit Singh, equity analyst at
“The FY21 revenue outlook calls for
38% growth at the high end of guidance compared to 66% growth in 2020 which we
- 1) tougher compares in 1H,
- 2) lingering headwinds from slower
customer expansion trends in 2Q20 and
- 3) general conservatism on the still
difficult to predict spending environment.
Taking this into account, we view FY21
guidance as conservative and see the current trajectory of growth given recent
outperformance consistent with mid-to-high 40% revenue growth for the full
year. However, at ~34x CY21e sales, we think shares currently anticipate this
level of growth in 2021, leaving us waiting for a more material pullback.”
Morgan Stanley gave a base target price of $120 with a high of $180
under a bull scenario and $40 under the worst-case scenario. The firm currently
has an “Equal-weight” rating on the IT company’s stock.
Fourteen analysts who offered stock ratings for Datadog in the last three
months forecast the average price in 12 months at $119.09 with a high forecast
of $141.00 and a low forecast of $95.00.
The average price target represents a 5.52% increase from the last price of
$112.86. From those 14 equity analysts, six rated “Buy”, eight rated “Hold” and
none rated “Sell.”
Other equity analysts also recently updated their stock outlook......
- Stifel raised the stock price
forecast to $120 from $100.
- Truist Securities upped the price objective to $125 from $120.
- Needham increased the target price to $141 from $109.
- Mizuho raised the target price to $135 from $115.
- Berenberg upped the target price to $111 from $103.
- RBC increased the target price to $120 from $110.
- Barclays upped the price objective to $135 from $115.
Leading Product in a Growing Market Supports Continued Rapid Growth.....
“Datadog has positioned itself as the
leading observability platform for most modern cloud environments. Strong
secular tailwinds towards modern performance monitoring with the re-platforming
to the cloud creates an underpenetrated market that we estimate at >$30
billion, supporting our 30%+ annual revenue forecast through CY23,” Morgan
Stanley’s Singh added.
3. Datadog’s Services.....
simplifies the process of installing software and services across a wide
range of computing platforms, and monitoring the performance of all those
applications, by breaking down silos and pulling all of that data onto unified
performance-monitoring dashboards. Over 400 software platforms, including
Amazon Web Services and Microsoft Azure, provide native support for Datadog's
demand for its services is rising. Datadog ended 2020 with 1,253 customers
generating over $100,000 in ARR (annual recurring revenue), up 46% from 2019.
The number of customers with over $1 million in ARR rose 94% to 50.
4. High Retention Rate.....
has kept its net retention rate, which measures its year-over-year revenue
growth per existing customer, over 130% for 14 consecutive quarters. It
attributes that streak to its "land and expand" strategy, wherein it
signs a customer up for a single service before cross-selling additional
the end of the fourth quarter, 22% of Datadog's customers were using four or
more of its products, up from 10% a year ago. More than 70% of its customers
were using two or more products, up from about 60% a year ago.
5. Growing Margins.....
Datadog’s adjusted gross and operating margins either held steady or
expanded in the fourth quarter and full year.
attributed the rising gross margin to its more efficient use of cloud hosting
expenses and its higher operating margin to significantly lower sales and
6. Rising Cash Flows.....
soaring revenue and expanding margins, along with a convertible debt offering
last June, boosted its free cash flow from just $791,000 in 2019 to $83.2
million in 2020. That massive jump explains why Datadog is buying up companies
like Timber, which will improve its data observability features, and Sqreen,
which blocks application-level attacks, to expand its ecosystem.