Please ensure Javascript is enabled for purposes of website accessibility

Why Datadog Stock Jumped on Friday

By Daniel Sparks – Updated Oct 9, 2020 at 1:55PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

One analyst thinks it's going to be a great quarter for U.S. software companies like Datadog.

What happened

Shares of monitoring and analytics platform specialist Datadog (DDOG 1.52%) jumped higher on Friday, rising about 10% as of 2 p.m. EDT.

The stock's rise comes as one analyst boosted his price target for the stock. In addition, overall bullishness on the Street for tech stocks likely helped as well.

A chart showing a stock price moving higher.

Image source: Getty Images.

So what

Barclays analyst Raimo Lenschow, who has an overweight rating (similar to a buy rating) on the growth stock, increased his 12-month price target for Datadog shares from $107 to $126. This updated price target represents about 12% upside from where the stock is trading at the time of this writing. It also reflects the analyst's expectation for upbeat news from U.S. enterprise-facing software companies when they report their latest quarterly results during earnings season. Lenschow says his industry channel checks point to an improving environment for information technology (IT) spending.

Also fueling the stock's gain on Friday is probably the strong momentum in the overall market -- particularly among tech stocks. As of this writing, the Nasdaq Composite was up 1.2%.

Now what

When Datadog reported its second-quarter results in early August, management guided for third-quarter revenue to come in between $143 million and $145 million. The midpoint of this guidance range implies 50% year-over-year revenue growth. 

"COVID-19 has illuminated the need to be digital-first and agile, as well as the cloud as the IT architecture of choice to achieve these outcomes," said Datadog CEO Olivier Pomel in the company's second-quarter earnings release. 

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Datadog. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Datadog, Inc. Stock Quote
Datadog, Inc.
$88.78 (1.52%) $1.33
Barclays PLC Stock Quote
Barclays PLC
$6.40 (-1.24%) $0.08

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.