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On Friday, Baird, a financial services firm, increased its stock price target for Datadog (NASDAQ:DDOG), a monitoring and analytics platform for developers, IT operations teams, and business users. The new target is set at $175, up from the previous $150, while the stock maintains an Outperform rating.
According to InvestingPro data, Datadog currently trades at $156.73, with a market capitalization of $53.2 billion and demonstrates GREAT financial health with an overall score of 3.02 out of 4.
The adjustment in the price target reflects Datadog's current trading value, which is at 16.7 times Baird's 2025 revenue forecast. This valuation is notably higher than the broader Software (ETR:SOWGn) as a Service (SaaS) industry average, which stands at approximately 8.5 times.
InvestingPro analysis indicates the stock is slightly overvalued at current levels, with impressive gross profit margins of 81.24% and strong revenue growth of 26.3% over the last twelve months. For deeper insights into Datadog's valuation metrics and 16 additional ProTips, consider accessing the comprehensive Pro Research Report.
Baird's rationale for the new price target is grounded in the expectation that Datadog will continue to experience strong growth coupled with high margins and free cash flow (FCF). The firm has based the $175 target price on 19 times their revenue estimate for the year 2025. This valuation represents a premium compared to other high-growth, high-margin software companies, which typically trade at around 16 times revenue.
The analyst from Baird noted the improving momentum of Datadog as a significant factor in their optimistic outlook. The company's performance is seen as indicative of its strong growth potential and its ability to generate substantial margins and free cash flow.
The assessment aligns with InvestingPro data showing the company holds more cash than debt on its balance sheet and maintains a healthy current ratio of 2.13, supporting its strong financial position.
Datadog's stock evaluation by Baird suggests confidence in the company's future financial performance. The firm's analysis points to Datadog's position in the market and its financial health, affirming the stock's Outperform rating alongside the raised price target.
In other recent news, Datadog, a cloud-based monitoring and analytics platform, has been the subject of several analyst upgrades and strategic moves. Macquarie initiated coverage on the company with an Outperform rating, citing favorable market dynamics and potential for market share gain. The firm also noted Datadog's robust revenue model and its strategy of encouraging customers to adopt multiple products as strengths.
The company recently announced its intention to offer $775 million in Convertible Senior Notes due in 2029. The proceeds are intended for general corporate purposes and to fund capped call transactions, expected to reduce potential dilution from note conversion.
In analyst news, TD Cowen maintained a Buy rating on Datadog shares, citing significant opportunities to gain market share and strong cloud leverage. Similarly, CMB International Securities initiated a Buy rating, anticipating a 24% compound annual growth rate in revenue from 2023 to 2026. BMO Capital Markets raised its price target to $145, recognizing the increasing contribution of Artificial Intelligence to Datadog's business.
The company reported a 26% year-over-year revenue increase, reaching $690 million, with 3,490 customers contributing over $100,000 in annual recurring revenue. These are recent developments, reflecting the growing confidence in Datadog's long-term growth prospects.
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