What happened
Shares of Datadog (DDOG 4.95%) fell as much as 5.7% early Monday, then settled to trade down 2.5% as of 11:55 a.m. EDT, after a noted Wall Street analyst downgraded the data analytics platform provider.
So what
In a note to clients early Monday morning, Bank of America analyst Koji Ikeda downgraded shares of Datadog from buy to neutral and lowered his firm's per-share price target from $123 to $105. The cloud computing stock is currently trading around $91 per share as of this writing.
Ikeda rationalized that he views Datadog's "upside as likely capped as conservative demand, competitive threats, and meaningful AI tailwinds likely come in second half 2024, constraining the growth growth profile."
Ikeda also lowered his firm's estimates for Datadog's revenue to $2.4 billion in 2024 (below consensus estimates for $2.53 billion) and $2.9 billion in 2025 (below consensus estimates for $3.25 billion).
Now what
The timing of the call is curious. While shares of Datadog are still up around 26% year to date even after today's drop, they've also already pulled back sharply in August after the company's conservative outlook overshadowed its better-than-expected second-quarter results.
We should receive more perspective on whether Bank of America's caution is merited when Datadog reports third-quarter results in early November. But for now, it's no surprise to see the stock pulling back as investors second-guess Wall Street's forward revenue expectations today.
