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Why Datadog Stock Rose Today

By Evan Niu, CFA – Updated Oct 7, 2020 at 2:57PM

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The cloud-monitoring-as-a-service company got a lukewarm initiation from a Wall Street analyst.

What happened

Shares of Datadog (DDOG -0.58%) rose today, up by 3% as of 1:40 p.m. EDT, after analysts at financial firm Berenberg initiated coverage of the tech company with a hold rating. Despite that lukewarm rating, the research note included some positive comments. The stock had been up by as much as 5% in morning trading.

So what

Analyst Kingsley Crane started Datadog at hold alongside a price target of $103, which is slightly below Tuesday's closing price. The tech company is a leader in cloud monitoring, and should be able to keep growing its market share in cybersecurity, according to Berenberg.

Datadog logo

Image source: Datadog.

Datadog had 1,015 customers with over $100,000 in annualized revenue run-rate at the end of the second  quarter, up from just 594 a year prior.

Now what

There's a broad shift underway in the cybersecurity market: IT teams are pivoting from a preference for monitoring services toward those focused on observability, which includes the active exploration of new patterns, according to Crane. Datadog offers both monitoring and observability services.

Investors also cheered a major partnership with Microsoft that was announced last week. That deal will integrate Datadog's observability platform into Microsoft's Azure cloud.

"Observability is a key capability for any successful cloud migration," Datadog Chief Product Officer Amit Agarwal said at the time. "Through our new partnership with Microsoft Azure, customers will now have access to the Datadog platform directly in the Azure console, enabling them to migrate, optimize and secure new and migrated workloads."

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Datadog and Microsoft and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool has a disclosure policy.

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