What happened

Shares of cloud-based data monitoring and analytics platform Datadog (DDOG -1.43%) inched higher on Wednesday morning, rising 2.3% through 11:05 a.m. EST.

You can thank investment bank Oppenheimer for that.

So what

Praising the company for its "unified, real-time view into the entire technology stack" this morning, Oppenheimer upgraded Datadog stock to outperform and gave it a $105 price target that implies the stock could rise nearly 29% over the next 12 months, reports StreetInsider. And Oppy reassured investors who are worried about the prospects of richly valued cloud stocks rising in the face of a looming recession, saying,  "While not recession-proof, the mission-critical nature of its solutions gives Datadog relative resiliency in times of spending constraints."

Now what

In the context of a recession that slows the economy's growth and deprives profitless growth stocks of much of their attractiveness -- while at the same time raising the cost of debt through higher interest rates -- it's more important than ever for investors to seek out stocks capable of funding their own operations without debt.

Oppenheimer argues that this description fits Datadog to a T, inasmuch as the company boasts strong free cash flow and the potential for continued revenue growth in the 30% annual range. Turning to S&P Global Market Intelligence for confirmation, we see that Datadog -- while technically unprofitable on the basis of generally accepted accounting principles (GAAP) -- has been free-cash-flow-positive since at least 2019, and generated at least $364 million in positive free cash flow over the past 12 months. (This is true even if you count capitalized software costs as a capital expense).

That being said, it's probably a mistake to think that Datadog stock would be a buy even if a recession slowed its growth rate. Currently, Datadog stock carries an enterprise-value-to-free-cash-flow ratio of 67 -- which is pretty high. This valuation is arguably justified if Datadog continues to grow as most analysts forecast it will, at a rate of 44% annually over the next five years. On the other hand, if Oppenheimer is right and growth slows to the 30% range, I fear an investment in Datadog could remain a risky proposition.

Conclusion: With its stock down more than 50% over the past year, it's tempting to think Datadog stock can't go much lower than it already has. If its growth slows enough, though...I fear this stock really could keep going lower.