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On Thursday, TD Cowen maintained its Buy rating on Datadog (NASDAQ:DDOG) shares but revised the price target downward from $165.00 to $140.00. The adjustment comes ahead of the company’s earnings report, which is scheduled for May 6. According to InvestingPro data, Datadog maintains a "GOOD" overall financial health score, with analysts forecasting EPS of $1.82 for fiscal year 2025. TD Cowen anticipates a performance that surpasses expectations, although by a smaller margin than usual, with positive implications for the full-year guidance.
The firm’s analysis of sales headcount data indicates a strong quarter-over-quarter increase, aligning with management’s growth strategy. This optimism is supported by Datadog’s impressive 26.12% revenue growth over the last twelve months and industry-leading gross profit margins of 80.81%. TD Cowen also addressed concerns regarding OpenAI, describing them as exaggerated and not a significant threat to Datadog’s core non-AI growth, which they are monitoring for stabilization.
In terms of valuation, Datadog’s shares have declined precisely 35.7% year-to-date, underperforming the EMCLOUD index, which is down 18%. Despite this, TD Cowen finds the current trading multiples of 30 times enterprise value to calendar year 2026 estimated free cash flow (EV/CY26E FCF) and 8 times EV/Sales to be highly attractive. The firm also noted that short interest in Datadog has fallen approximately 30% since January. InvestingPro subscribers can access 15+ additional key insights about Datadog’s valuation and growth prospects.
Looking ahead, TD Cowen sees potential inclusion in the S&P 500 as a positive catalyst for Datadog’s stock, possibly within this year. The new price target of $140.00 equates to roughly 47 times EV/CY26E FCF, based on the company’s lowered sector multiples.
In other recent news, Datadog has been the focus of several analyst updates and product announcements. UBS analyst Karl Keirstead reduced Datadog’s price target to $120 but maintained a Buy rating, citing a mixed customer outlook and potential macroeconomic impacts on cloud migration. Meanwhile, Scotiabank (TSX:BNS)’s Pat Colville also lowered the price target to $125 while keeping a Sector Outperform rating, noting strategic investments and new product introductions as key growth drivers. DA Davidson reiterated a Buy rating with a $165 target, projecting a 20-25% growth rate for Datadog over the next few years despite market challenges.
In product news, Datadog announced enhancements to its BigQuery monitoring capabilities for Google (NASDAQ:GOOGL) Cloud users, aiming to provide detailed insights into data usage and costs. The announcement was made at the Google Cloud Next (LON:NXT) conference, where Datadog was recognized as the Google Cloud Partner of the Year for the third consecutive year. KeyBanc Capital Markets maintained its Sector Weight rating, highlighting positive developments such as customer migration from Splunk (NASDAQ:SPLK) to Datadog and interest in new products like Flex (NASDAQ:FLEX) Logs. Despite some deferred deals impacting first-quarter results, the sales pipeline for the second quarter appears strong. These developments indicate a dynamic period for Datadog as it navigates both market opportunities and challenges.
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