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S&P 500   4,026.12
DOW   34,347.03
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Considerations When Rolling Over a 401(k) into a Roth IRA
THE BEST BLACK FRIDAY DEAL YET (Ad)
Whole Foods decision to pull lobster divides enviros, pols
Biden eases Venezuela sanctions as opposition talks resume
THE BEST BLACK FRIDAY DEAL YET (Ad)
Airbnb has a plan to fix cleaning fees
Saudi viewers angry over apparent ban on World Cup streaming
See how to make money instead of spending it on Black Friday with this offer (Ad)
Cuba's informal market finds new space on growing internet
Walmart shooting claims teen, young woman, father, mother
S&P 500   4,026.12
DOW   34,347.03
QQQ   286.92
Considerations When Rolling Over a 401(k) into a Roth IRA
THE BEST BLACK FRIDAY DEAL YET (Ad)
Whole Foods decision to pull lobster divides enviros, pols
Biden eases Venezuela sanctions as opposition talks resume
THE BEST BLACK FRIDAY DEAL YET (Ad)
Airbnb has a plan to fix cleaning fees
Saudi viewers angry over apparent ban on World Cup streaming
See how to make money instead of spending it on Black Friday with this offer (Ad)
Cuba's informal market finds new space on growing internet
Walmart shooting claims teen, young woman, father, mother
S&P 500   4,026.12
DOW   34,347.03
QQQ   286.92
Considerations When Rolling Over a 401(k) into a Roth IRA
THE BEST BLACK FRIDAY DEAL YET (Ad)
Whole Foods decision to pull lobster divides enviros, pols
Biden eases Venezuela sanctions as opposition talks resume
THE BEST BLACK FRIDAY DEAL YET (Ad)
Airbnb has a plan to fix cleaning fees
Saudi viewers angry over apparent ban on World Cup streaming
See how to make money instead of spending it on Black Friday with this offer (Ad)
Cuba's informal market finds new space on growing internet
Walmart shooting claims teen, young woman, father, mother

Will Wall Street's Enthusiasm About Datadog Lead To Big Gains?

Key Points

  • Datadog handily beat earnings and revenue views in its most recent quarter
  • Wall Street expects strong earnings growth for the full year and for 2023
  • Despite analyst optimism for the long term, enthusiasm was temporarily muted because the company only guided in line with expectations

Will Wall Streets Enthusiasm About Datadog Lead To Big Gains? Cloud monitoring specialist Datadog (NASDAQ: DDOG) has been the subject of analyst enthusiasm recently - at least for the most part, according to data compiled by MarketBeat.  

On Friday, Credit Suisse initiated coverage with an “outperform” rating. Earlier in the week, Moffett Nathanson analyst Sterling Auty opened coverage with a “buy” rating and a price target of $143, representing a potential upside of 51.31%. Also, middle-market investment bank Robert W. Baird opened coverage of the stock with a rating of “outperform” and a target of $120. 

The only outlier, in terms of new analyst coverage, was JPMorgan Chase, which began coverage with a rating of “neutral.” 

The stock has lost ground since reporting its second quarter on August 4. The company reported earnings of $0.24 per share, up 167% from the year-ago quarter. That exceeded the consensus estimate of $0.14 per share, as MarketBeat earnings data show. 

Revenue came in at $406.14 million, handily beating the consensus estimate of $381.28 million. That was a year-over-year increase of 74%. 

The company posted earnings growth between 80% and 300% in the past five quarters. Revenue grew at high double-digit rates in the past eight quarters. 

In the earnings release, Datadog highlighted several new service partnerships and upgrades. It also noted that it had about 2,420 customers with annual recurring revenue of $100,000 or more, an increase of 54% over the year-earlier quarter. 


For the full year, Wall Street anticipates a profit of $0.80 per share, which would be an increase of 67%. That’s seen rising another 34% in 2023, to $1.07 per share. 

So with all that good news, why did the stock go into a slump? 

Obviously, part of the answer is the same for the majority of stocks: Worries about interest rates, inflation, recession, and simply a broad-market downdraft. 

But in Datadog’s case, there was some company-specific news that dismayed investors: The company’s guidance was only in line with expectations rather than surpassing views. 

Datadog provided the following guidance for the third quarter:

  • Revenue between $410 million and $414 million.
  • Non-GAAP operating income is between $51 million and $55 million.
  • Non-GAAP net income per share between $0.15 and $0.17

For the full year, it expects: 

  • Revenue between $1.61 billion and $1.63 billion.
  • Non-GAAP operating income is between $255 million and $275 million.
  • Non-GAAP net income per share is between $0.74 and $0.81.

For the full year, you can see how net income has a chance of coming in at the lower end of expectations, which would significantly miss analyst views. 

Nonetheless, Wall Street obviously maintains confidence in the stock, given the optimistic consensus price target of $148.36, a potential upside of 67.26%. 

Another sign of optimism, and one that investors can often take to the bank: Institutional ownership soared in the most recent quarter. 

Institutions own 72% of the shares, which is a strong vote of confidence. Funds hold 52% of shares. More institutions have purchased shares than sold shares in the past 12 months. 

Why is institutional ownership important? First, investment banks, funds, insurance companies, university endowments, and other large owners have dedicated research teams to meticulously ferret out opportunities. 

Second, institutions don’t buy and sell willy-nilly. Instead, they tend to accumulate positions over time when they have conviction about a stock. They also don’t tend to bail out in a panic, although today’s algorithms often trigger sales when a price falls below pre-determined technical thresholds. 

Although it went public just three years ago, Datadog’s market cap of $28.30 billion puts it among the top enterprise software makers in terms of value. It trails Salesforce (NYSE: CRM), SAP (NYSE: SAP), ServiceNow (NYSE: NOW), Snowflake (NYSE: SNOW), Workday (NASDAQ: WDAY), and Shopify (NYSE: SHOP). There are dozens of industry peers with lower valuations, including some well-known names like Asana (NYSE: ASAN) and Twilio (NYSE: TWLO)

As a fairly new company that’s in growth mode and one that institutions have confidence in, Datadog is a good watchlist candidate for the next market uptrend. 

Should you invest $1,000 in Twilio right now?

Before you consider Twilio, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Twilio wasn't on the list.

While Twilio currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Datadog (DDOG)
2.5792 of 5 stars
$74.84-0.6%N/A-1,496.80Moderate Buy$123.23
Salesforce (CRM)
3.0865 of 5 stars
$153.35+0.7%N/A283.98Moderate Buy$224.24
SAP (SAP)
2.2312 of 5 stars
$110.65+0.7%1.85%36.88Hold$110.07
Workday (WDAY)
2.9332 of 5 stars
$148.98-0.2%N/A-191.00Moderate Buy$221.48
Snowflake (SNOW)
2.706 of 5 stars
$144.72-1.2%N/A-66.69Moderate Buy$207.86
Shopify (SHOP)
2.1763 of 5 stars
$36.79+0.1%N/A-14.51Hold$61.86
Asana (ASAN)
2.3455 of 5 stars
$18.46-2.0%N/A-9.42Hold$31.91
Twilio (TWLO)
2.8084 of 5 stars
$48.56+0.4%N/A-6.69Hold$104.04
Compare These Stocks  Add These Stocks to My Watchlist 

Kate Stalter

About Kate Stalter

Contributing Author: Retirement, Asset Allocation, and Tax Strategies

Kate Stalter is a Series 65-licensed asset manager, with more than two decades of experience in various areas of financial services. As an investment advisor and financial planner, Kate personally manages client portfolios, with a focus on successful retirement, including asset allocation, income generation and tax strategies. Kate also serves as a capital-markets contributor at Forbes.com, and is an expert columnist for the investment advisory channel at U.S. News & World Report.
Contact Kate Stalter via email at stalterkate@gmail.com.