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On Tuesday, UBS analyst Karl Keirstead revised the price target on Datadog (NASDAQ:DDOG) shares, reducing it to $120 from the previous $164, while sustaining a Buy rating on the stock. The company, currently trading at $92.67 with a market capitalization of $31.78 billion, has seen its stock price decline by over 27% in the past six months, according to InvestingPro data. Keirstead’s decision comes as he anticipates Datadog’s first-quarter earnings report, expected in early May, and follows recent discussions with five Datadog customers about their spending plans amidst a challenging macroeconomic climate. These customer conversations took place shortly before the tariff announcement on April 3rd.
Keirstead’s assessment revealed a mixed outlook, with a noticeable shift among customers towards stricter IT cost management, which includes observability software expenses. There is also concern over a potential deceleration in cloud migration activities if the economic downturn persists. Despite these factors, the analyst maintains a positive stance on Datadog, citing its impressive 26.12% revenue growth over the last twelve months and industry-leading gross profit margins of 80.81%. The company’s strong operational metrics, robust observability market position, low risk of DOGE (Datadog’s Operational Growth and Efficiency), and compelling AI narrative continue to support the bullish thesis.
The analyst remains confident in Datadog’s valuation, which is currently at approximately 28 times the firm’s projected 2026 free cash flow (FCF). Trading at a P/E ratio of 169.55, the stock commands premium multiples reflecting its growth potential. However, Keirstead suggests that the likelihood of a rally in Datadog’s stock price following the first-quarter earnings report may be diminished if the core results from major cloud services like AWS and Azure exhibit macroeconomic weakness. InvestingPro analysis reveals 16 additional key insights about Datadog’s valuation and growth prospects.
Datadog, a cloud monitoring and analytics platform, has been a prominent player in the observability space, offering services that enable businesses to monitor their servers, databases, tools, and services through a SaaS-based data analytics platform. The company’s forthcoming earnings report, scheduled for May 1st, will provide further insight into its performance and the impact of the current economic environment on its business. For a comprehensive analysis of Datadog’s financial health, growth prospects, and valuation metrics, access the detailed Pro Research Report available exclusively on InvestingPro.
In other recent news, Datadog announced the expansion of its monitoring capabilities for Google (NASDAQ:GOOGL) Cloud’s BigQuery, providing enhanced insights into data usage and costs. The company was also recognized with the Google Cloud Partner of the Year award for the third consecutive year. Additionally, Datadog plans to open its first Australian data center, broadening its global reach and enhancing data sovereignty for local customers. On the financial front, DA Davidson maintained a Buy rating on Datadog, with a price target of $165, citing a projected growth rate of 20-25% over the coming years. Meanwhile, Scotiabank (TSX:BNS) adjusted its price target for Datadog to $125 but maintained a Sector Outperform rating, emphasizing the company’s strategic investments and potential for revenue growth. KeyBanc Capital Markets kept a Sector Weight rating on Datadog, noting positive customer migration trends and interest in emerging products. These developments reflect Datadog’s ongoing efforts to strengthen its market position and expand its service offerings globally.
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