Please ensure Javascript is enabled for purposes of website accessibility

Why Datadog Stock Jumped Today

By Evan Niu, CFA - Jan 20, 2021 at 1:20PM

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

Truist Securities initiated coverage of Datadog with a buy rating.

What happened

Shares of Datadog (DDOG -1.80%) jumped today, up by 6% as of 12:45 p.m. EST, after a Wall Street analyst initiated coverage on the company. Truist Securities has started Datadog stock with a buy rating and assigned a price target of $120, which represents 21% upside from yesterday's close.

So what

Analyst Joel Fishbein acknowledges that Datadog is currently trading at lofty valuation multiples but believes that the company's strong growth and leadership in the growing observability market justifies the premium. Revenue jumped 61% in the third quarter, and sales are forecast to increase by 62% for the full-year 2020.

Green stock chart going up

Image source: Getty Images.

Datadog's cloud-based platform has "superior architecture" and offers better monitoring capabilities compared to its legacy rivals, while companies continue to migrate to the cloud. "We see near-term elongation of sales cycles giving way to a catch-up in demand and a long tail of durable growth for the company," Fishbein wrote in a research note to investors.

Now what

Datadog has not yet scheduled its fourth-quarter earnings release but is expected to report in mid-February. The technology company's outlook calls for revenue of $162 million to $164 million, which should result in adjusted earnings per share of $0.01 to $0.02. Analysts are currently expecting Datadog to report $163.6 million in sales and $0.02 per share in adjusted profits.

On the last earnings call, CFO David Obstler said that Datadog is taking a conservative approach to guidance due to ongoing macroeconomic uncertainties related to the COVID-19 pandemic.

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.
DDOG
$94.79 (-1.80%) $-1.74

*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 service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/21/2022.

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.