What happened
Shares of Datadog (DDOG +1.26%) charged sharply higher Tuesday, surging as much as 8.4%. As of 2:12 p.m. ET, the stock was still up 6%.
The catalyst that sent the cloud monitoring and security company higher was an optimistic take by a Wall Street analyst who initiated coverage on the stock.
NASDAQ: DDOG
Key Data Points
So what
BTIG analyst Gray Powell initiated coverage on Datadog stock, issuing a buy rating and assigning a price target of $175, according to The Fly. That suggests potential upside for investors of roughly 25% over the coming year compared to Monday's closing price.
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Powell believes Datadog's cloud-based data monitoring and security services will benefit from the ongoing trends in the observability market over the next several years. The digital transformation continues with many companies taking their first steps toward the cloud. He sees Datadog as a logical beneficiary of these investments and believes the company is "winning across multiple product categories."
After reviewing the competition, Powell views Datadog as the most innovative provider out there. He also suggests that the company has significant potential to continue its expansion into ancillary services, with additional cybersecurity offerings providing the most potential.
Powell went a step further, saying he is "very confident" in both the short- and long-term outlook for Datadog stock.
Now what
The analyst may be on to something. Datadog was cited as a leader by Gartner's Magic Quadrant for Application Performance Monitoring. Gartner cited Datadog's new product deployments, which include "infrastructure monitoring, log analysis solution, network monitoring, [digital experience monitoring] and, most recently, a security analysis tool."
Datadog closed out 2021 with fourth-quarter revenue that grew 84% year over year. The results were driven by customers with $100,000 or more in annual recurring revenue (ARR), which jumped 63%, while those with $1 million or more surged 114%.
Given the industry accolades, its continued strong growth, and its expanding addressable market, investors should consider taking Datadog for a walk.
