Please ensure Javascript is enabled for purposes of website accessibility

Why These 2 High-Growth Favorites Lifted the Nasdaq Monday

By Dan Caplinger - Mar 15, 2021 at 2:04PM

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

Stocks in the Nasdaq saw some volatility as the new week began.

Stock markets have been hitting record highs lately, but the Nasdaq Composite (^IXIC 0.00%) has lagged behind. Even on Monday afternoon, when the Nasdaq was up 0.2% as of 1:30 p.m. EDT, the favorite benchmark among high-growth investors still languished almost 5% below its recent all-time highs.

Nevertheless, many of the growth stocks in the Nasdaq are performing well to start the new week, and investors have high hopes that they could provide the leadership to send the index to record levels once again. Below, we'll look more closely to see why Align Technology (ALGN -0.48%) and Datadog (DDOG -10.72%) posted sizable gains on Monday.

Align gets paid -- more

Shares of Align Technology were up nearly 4% Monday afternoon. The maker of Invisalign clear aligners for orthodontic work got good news that should result in a nice boost to an already impressive cash award resulting from disputes against a key competitor.

Person smiling and showing teeth.

Align has all the smiles today. Image source: Getty Images.

Align received a favorable outcome in binding arbitration against SmileDirectClub (SDC -6.25%) and various parties related to that company. Align previously held an ownership interest in SmileDirectClub, and a prior arbitration order had required Align to sell that interest back to SmileDirectClub. Align disagreed with SmileDirectClub's initial determination of the value of that interest, and although SmileDirectClub had already paid $54.2 million to date, Align wanted more.

That's exactly what Align got Monday, as the arbitrator ordered SmileDirectClub to pay an additional $45.5 million to Align to reflect the higher valuation plus interest. In addition, further interest will accrue at a rate of $3,000 per day until the amount is paid in full.

The two companies have worked hard to disentangle themselves from their past relationship for a long time now. Going forward, SmileDirectClub and Align will be competitors, and that competition could turn cutthroat given the extended disagreements between the two orthodontic device specialists.

Datadog gets a treat

Meanwhile, in the software-as-a-service space, Datadog saw its stock rise nearly 6%. Even with the upward move, the stock has regained only a small part of the ground it has lost since mid-February, but investors are increasingly optimistic that Datadog can build upward momentum.

Datadog grew dramatically during the COVID-19 pandemic, as cloud-based analytics became even more important without more traditional sources of business information and intelligence available. The company nearly doubled the number of million-dollar customers it has, and the ongoing trend toward digital transformation should make its services equally valuable going forward.

Some investors are concerned that once the pandemic comes under control, Datadog could lose a key tailwind that has helped accelerate its growth. But there's reason to believe that Datadog's best days aren't over just yet. Datadog hasn't been scared to spend up on research and development, even if it means giving up current profitability as a result. Long-term investors are more confident that deferring gratification by accepting red ink for a little while longer will pay off with better profits in the years to come.

Both Datadog and Align understand that when a business is working, it pays to stick with it. Shareholders are reaping the rewards today, and further gains could be ahead if Align and Datadog can keep up their operational excellence.

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

Align Technology, Inc. Stock Quote
Align Technology, Inc.
$274.20 (-0.48%) $-1.32
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
$11,805.00 (0.00%) $0.00
SmileDirectClub, Inc. Stock Quote
SmileDirectClub, Inc.
$1.35 (-6.25%) $0.09
Datadog, Inc. Stock Quote
Datadog, Inc.
$97.19 (-10.72%) $-11.67

*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
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 05/17/2022.

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.