A 4% jump on Monday was enough to make shares of Datadog (NASDAQ: DDOG)
among the better performing of US tech names on a day that saw the sector taking a breather from a hot close to 2020 and start to 2021.
The New York based company, known for their data analytics and monitoring platform, have barely been public for a year. Since their IPO in October 2019, they’ve managed to tack on 160% to their share price value, not bad considering they had to watch their initial post IPO pop disintegrate last March at the onset of COVID. Based on some updates from yesterday, 2021 is lining up to be another cracker.
Jefferies started the week off with an upgrade to Datadog shares yesterday, moving them from a Hold to Buy rating. They also slapped a fresh price target of $125 to the stock, suggesting there’s still some attractive upside of around 20% from Monday’s closing price. It was one of several upgrades from analyst Brent Thill who’s predicting 2021 will see the software and technology space continue to outperform, driven by “strong fundamentals”.
They’re also expected to see continued uptick off the back of last quarter’s SolarWinds breach, which brought cyber security and data monitoring stocks back to the headlines for all the right reasons. From a fundamental point of view, topline revenue has been increasing every quarter since they went public, while gross profit has also been able to maintain its upward direction, even during the worst of the pandemic last year.
That being said, their Q3 earnings in November had operating income and EPS dipping considerably, although they still managed to beat analyst expectations. The subsequent dip was short lived however, with shares managing to push on to the guts of 30% in the two months since. At its core, business remains strong with their customer acquisition model ticking over nicely and revenue growing at upwards of 60% year on year by November’s count.
Like with many tech stocks, Datadog commands a multi-billion market capitalization but has yet to turn a consistent profit. While investors have for the most part in recent years been happy to leave that box unchecked, it’s always on their radar to some degree. The consensus among analysts is that Datadog should be able to get to profitability within the next two years or so which offers a nice runway for investors getting involved now.
Good Days Ahead
There are some bears who’d point to 2021 as being a year when high flying tech stocks from 2020 should lag the broader market, as the big money starts to shift to recovery plays like restaurants, theme parks, and travel stocks. However, so far so good and there’s every reason to think Datadog’s 2020’s momentum will continue into 2021.
Their shares have been setting higher lows and lower highs since August, which means the range is tightening into a pennant and a breakout in one direction or another is due. They’re currently trading towards the top of that band so it wouldn’t be unusual for them to dip back towards the rising trend line around the $92 mark before making another push to break out to the upside.
With recent developments and their current momentum, it’s looking like Datadog has managed to find their feet in the middle of a pandemic and is now ready to push on to fresh all time highs.
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