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On Thursday, Goldman Sachs reiterated its Buy rating on Datadog (NASDAQ:DDOG) shares, maintaining a $162.00 price target. The affirmation follows a virtual non-deal roadshow (NDR) with Datadog’s CEO Olivier Pomel and CFO David Obstler held on February 14, 2025. According to InvestingPro data, the stock currently trades at $125.69, with analyst targets ranging from $125 to $230, suggesting potential upside. The company maintains strong financial health with an InvestingPro Overall Score of "GOOD." Analysts at Goldman Sachs came away with a more positive view on the company’s strategic positioning as a provider of infrastructure software and its comprehensive observability platform.
The NDR highlighted Datadog’s strategic product investments, which are expected to strengthen the company’s long-term market position in the field of Observability. These investments are seen as enhancing opportunities for competitive displacements as well as potential for increased cross-selling and upselling. Another key takeaway from the roadshow was the solid growth outlook for AI-native customers, which is supported by strong renewal trends. AI-customer revenue has shown growth, increasing to 6% of annual recurring revenue (ARR) in the fourth quarter of 2024 from 3% in the same quarter of the previous year. The company’s impressive gross profit margin of 80.81% and strong liquidity position, with a current ratio of 2.64, support these strategic initiatives. InvestingPro subscribers can access 12+ additional key metrics and insights about Datadog’s financial health.
Goldman Sachs analysts noted the limited visibility and predictability of out-quarter usage revenue, which underpins the conservative nature of Datadog’s initial fiscal year 2025 guidance, projecting 18-19% growth. Despite this, there is an expectation that Datadog’s continued focus and execution on go-to-market (GTM) investments could positively impact the company’s top-line revenue over time.
The firm continues to view Datadog as a compounding growth asset, with the potential to maintain a desirable combination of 20%+ revenue growth and 25%+ operating margins. This growth trajectory is seen as capable of supporting revenues exceeding $10 billion in the long term. Goldman Sachs’ outlook for Datadog remains positive, reflecting confidence in the company’s future performance and market position. Recent data from InvestingPro shows the company achieved 26.12% revenue growth in the last twelve months, with analysts expecting continued growth of 19% in FY2025. For deeper insights into Datadog’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Datadog has reported several key developments that investors may find noteworthy. The company’s recent quarterly performance showed a 25% revenue growth, surpassing consensus estimates of 21%, according to William Blair. Datadog’s annual recurring revenue exceeded $3 billion, with significant contributions from its log management and application performance monitoring solutions. Despite these results, Datadog’s forward-looking revenue guidance of $3.185 billion, indicating an 18.7% year-over-year increase, fell short of market expectations of $3.24 billion, as noted by Stifel. Wolfe Research downgraded Datadog’s stock rating to Peer Perform, citing a shift in the growth environment and increased competition. In contrast, DA Davidson maintained a Buy rating with a $165 price target, expressing confidence in Datadog’s growth prospects despite conservative guidance. Goldman Sachs also reiterated a Buy rating with a $162 price target, emphasizing Datadog’s track record of surpassing initial revenue growth and operating margin guidance. These recent developments highlight a mix of strong past performance and cautious future outlooks from various analysts.
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