DA Davidson maintains Buy on Datadog stock with $165 target

On Monday, DA Davidson reiterated a Buy rating on Datadog (NASDAQ:DDOG) stock, maintaining a price target of $165.00. The firm’s analyst highlighted Datadog as a top pick, benefiting from the shift from AI hardware to AI software infrastructure. Despite a recent drop of approximately 22% in Datadog shares over the past month, the analyst expressed confidence in the company’s potential for over 20% revenue growth this year. This optimism aligns with InvestingPro data showing impressive last twelve-month revenue of $2.68 billion and a robust gross profit margin of 80.81%. The decline in share value is partially attributed to Datadog’s conservative guidance for fiscal year 2025, which was anticipated prior to the company’s earnings release.

According to DA Davidson, Datadog’s guidance aligns with its history of conservative forecasting, and the firm remains optimistic about Datadog’s prospects. The analyst pointed to developer data and DEN checks as evidence supporting the belief that Datadog will continue to strengthen its leadership in the observability market. Despite 2025 being a year of increased investments for Datadog, which may temporarily compress margins, DA Davidson sees potential for the company’s financials to improve as it benefits from more widespread platform use, ongoing cloud migrations, and the positive effects of generative AI technologies.

Datadog’s current valuation metrics present an interesting picture. According to InvestingPro analysis, which provides comprehensive valuation insights across 1,400+ US stocks, the company currently trades near its Fair Value, with a P/E ratio of 185.48x. DA Davidson suggests that the market has not fully recognized Datadog’s growth potential and the expected benefits from its strategic investments. The firm’s steadfast Buy rating indicates a belief in the company’s ability to surpass performance expectations and deliver substantial revenue growth in the current fiscal year, with InvestingPro forecasting 19% revenue growth for FY2025.

The analyst’s comments also underscore the broader industry trend of increased investment in AI software infrastructure, which is expected to drive demand for Datadog’s products and services. As companies continue to transition to cloud-based solutions and leverage AI technologies, Datadog is poised to capitalize on these shifts in the technology landscape.

In conclusion, DA Davidson’s reaffirmation of a Buy rating and a $165.00 price target on Datadog reflects the firm’s positive outlook on the company’s strategic positioning and growth trajectory, despite short-term headwinds and conservative financial guidance. InvestingPro analysis reveals additional insights, including the company’s GOOD overall financial health score and strong balance sheet position. InvestingPro subscribers have access to 18 additional ProTips and detailed metrics that provide a comprehensive view of Datadog’s investment potential through the platform’s exclusive Pro Research Report.

In other recent news, Datadog has been the focus of several analyst reports highlighting its financial and strategic position. Piper Sandler maintained an Overweight rating with a $160 price target, expressing confidence in Datadog’s growth prospects despite a significant drop in its share price. Needham analysts also reiterated a Buy rating and a $160 price target, citing strong business momentum and the introduction of new products like LLM Observability. Meanwhile, Goldman Sachs reaffirmed its Buy rating with a slightly higher price target of $162, noting strategic product investments and a positive growth outlook for AI-native customers.

Conversely, Wolfe Research downgraded Datadog from Outperform to Peer Perform, adjusting their revenue forecasts and citing increased competition and customer optimization efforts. They set a fair value range of $100 to $140, reflecting a more cautious stance. DA Davidson, however, maintained a Buy rating and a $165 price target, emphasizing Datadog’s strong quarter driven by AI customer contributions, despite conservative guidance that fell below consensus expectations.

These recent developments underscore varied analyst perspectives on Datadog, reflecting both optimism about its growth potential and caution regarding competitive and market dynamics.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.