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Wolfe Research upgraded Datadog (NASDAQ:DDOG) from Peerperform to Outperform on Thursday, setting a price target of $150.00 for the cloud monitoring company. The company, currently valued at $41 billion, has demonstrated robust financial health with impressive revenue growth of 26% and industry-leading gross margins of 80%.
The upgrade follows Wolfe’s previous downgrade in February after Datadog’s fourth-quarter 2024 earnings report, which featured underwhelming growth expectations for fiscal year 2025 and concerns about the company’s concentrated AI-Native customer base. According to InvestingPro, 16 analysts have recently revised their earnings expectations upward, suggesting improving business momentum.
Wolfe Research cited its attendance at Datadog’s DASH conference in New York City as a key factor in the rating change, noting "sky-high" vibes and numerous AI announcements that suggested previous turbulence was "in the rearview."
The firm’s market checks revealed that fears about Datadog’s concentrated AI customer base had dissipated following a key renewal, with consumption at that customer continuing to scale.
Wolfe Research also highlighted that "at least 17 of 50 top AI companies" are now Datadog customers, reinforcing the cloud monitoring platform’s growing presence in the artificial intelligence sector. The company maintains a strong financial position with more cash than debt on its balance sheet and a healthy current ratio of 2.74.
In other recent news, Datadog has made significant announcements and updates. The company revealed several new AI monitoring tools, including AI Agent Monitoring, LLM Experiments, and the AI Agents Console, aimed at enhancing the evaluation of AI investments. These tools were introduced at Datadog’s annual DASH conference, where they also showcased product innovations like Flex (NASDAQ:FLEX) Frozen and Archive for improved log storage. UBS has raised its price target for Datadog to $140 from $125, maintaining a Buy rating due to positive feedback on emerging products, although they noted mixed responses regarding core product usage. Goldman Sachs increased its price target for Datadog to $138 from $127, highlighting the company’s robust AI innovations and strategic infrastructure software positioning. Stifel reiterated a Hold rating with a $120 price target, citing interest in Datadog’s generative AI capabilities but awaiting further data on core stability. Meanwhile, Citizens JMP maintained a Market Perform rating, reflecting a neutral stance on the stock. These developments indicate a period of strategic growth and innovation for Datadog, particularly in the AI sector.
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