DDOG - Datadog's High Potential Upside And Risks: Why The Stock Is A Hold Now
2024-03-28 03:16:58 ET
Summary
- Datadog is benefiting from digital transformation and the growth of IoT and edge computing, driving potential revenue growth.
- The company's observability platform helps reduce complexity in cloud computing and saves organization's time and money.
- Despite a strong fourth quarter earnings report, the stock dropped due to disappointing revenue and earnings forecasts.
Datadog ( DDOG ) is one of the biggest beneficiaries of digital transformation and companies moving to the cloud. Additionally, the proliferation of the Internet of Things ("IoT") and edge computing is driving a massive increase in machine-generated data, a secular trend that could potentially drive significant future revenue growth for the company's observability platform. The company displayed its upside potential last year when, despite heavy cloud optimization trends in 2023, it released a third-quarter earnings report crushing analysts' earnings estimates for the quarter and included a full-year 2023 guidance raise. JPMorgan upgraded the stock to overweight . The stock rose 28.50%, helping it outperform many Software-as-a-Service ("SaaS") companies over the last year, as shown in the chart below.
However, this company has several risks that some worried about even before last year's third-quarter earnings. Those risks never really disappeared and made some investors think twice after Datadog reported fourth quarter 2023 earnings before the bell on February 13, 2024. The company forecasted revenue of between $2.555 billion and $2.575 billion for the full year 2024, below analysts' estimates of $2.586 billion....
Datadog's High Potential Upside And Risks: Why The Stock Is A Hold Now