DDOG with Nobias technology: DDOG Shares Are Up 20% During The Last Month. Is It Too Late To Buy?
2022 has been a tough year for markets thus far. The S&P 500 is down 8.76% on a year-to-date basis. The Nasdaq has suffered even worse, down 13.4% on the year. However, that doesn’t mean that all tech stocks have been down and out during recent weeks. For instance, Datadog, Inc (DDOG) has rallied roughly 20% during the trailing 30 days. This move came on the heels of the company’s recent Q4 earnings report. We take a look at this stock to see what the credible analysts that cover it have had to say.
Nicole Kennedy, a Nobias 5-star rated analyst recently published an article on the stock which highlighted some of the company’s fundamental data coming into its recent earnings report. When describing DDOG’s operations, Kennedy said, “Datadog, Inc provides monitoring and analytics platform for developers, information technology operations teams, and business users in the cloud in North America and internationally. The company's SaaS platform integrates and automates infrastructure monitoring, application performance monitoring, log management, and security monitoring to provide real-time observability of customers technology stack.”
Kennedy wrote her piece on February 9th, a day before the February 10th earnings release. At the time, she noted that DDOG was trading for $151.73. Then, she went on to say: “The company has a debt-to-equity ratio of 0.77, a quick ratio of 3.94 and a current ratio of 3.94. The business’s 50-day simple moving average is $155.94 and its two-hundred day simple moving average is $151.69. The company has a market cap of $47.34 billion, a PE ratio of -1,083.71 and a beta of 1.17. Datadog has a fifty-two week low of $69.73 and a fifty-two week high of $199.68.”
DDOG Feb 2022
Let's start with a quick summary of Q4. Revenue was $326 million, an increase of 84% year over year and above the high end of our guidance range. We had about 18,800 customers, up from about 14,200 at the end of last year. We ended the quarter with about 2,010 customers with ARR of $100,000 or more, up from 1,228 at the end of last year.
When Datadog reported, it beat those estimates, posting revenue of $326.2 million, which was $34.78 million above Wall Street estimates, representing 83.7% year-over-year growth. The company’s non-GAAP earnings-per-share totaled $0.20 during the quarter, beating analyst consensus estimates by $0.09/share.
During the quarterly report, DDOG management provided Q1 fiscal year 2022 guidance, calling for revenue to come in a range of $334-$339 million, non-GAAP operating income to come in a range of $36-$39 million, and non-GAAP earnings-per-share to arrive in the range of $0.10-$0.12, which was essentially in-line with Wall Street’s $0.12/share consensus estimate.
The company also provided full-year 2022 estimates for sales, calling for them to arrive in the range of $1.51-$1.53 billion (above the $1.4 billion consensus), non-GAAP operating income to come in a range of $160-$180 million, and non-GAAP earnings-per-share to arrive in the range of $0.45-$0.51 (which was below analyst consensus of $0.58/share). Even though this earnings-per-share guide was below consensus, DDOG shares rallied on the Q4 results, popping more than 20% in the after hours.
During the company’s earnings report conference call, Olivier Pomel, DDOG’d CEO, was quite bullish on his company’s results saying: “Let's start with a quick summary of Q4. Revenue was $326 million, an increase of 84% year over year and above the high end of our guidance range. We had about 18,800 customers, up from about 14,200 at the end of last year. We ended the quarter with about 2,010 customers with ARR of $100,000 or more, up from 1,228 at the end of last year.” He continued: “These customers generated about 83% of our ARR. We had 216 customers with ARR of $1 million or more, which is more than double the 101 we had at the end of last year. The leverage and efficiency of our business model is coming through with free cash flow of $107 million. And our dollar-based net retention rate continued to be over 130% as customers increase their usage and adopted our newer product.”
Analysts seemed quite bullish on DDOG’s retention and growth amongst its higher paying clients; the market was pleased to see the adoption of its services amongst the larger corporations which should continue to have large CAPEX to dedicate towards products/services like DDOG offers over the long-term.
Pomel also announced a partnership with Amazon.com (AMZN) and its Amazon Web Services cloud operations which has the potential to increase the size and scale of DDOG’s services in a significant way. He said: “We also announced a global strategic partnership with AWS. This is a recognition of our success and growth with AWS and our commitment to further invest to accelerate our joint opportunities. Among the areas of further partnership, we have already integrated Datadog more tightly into the AWS marketplace. We are also working with AWS to build deeper integrations not only for observability, but also for security use cases, and we are also planning to extend our joint go-to-market activities.”
We see that it’s not just DDOG’s management team who’ve been bullish on the stock’s prospects lately. Tristan Rich, a Nobias 5-star rated author, recently published a piece which highlighted a handful of analyst updates on DDOG shares. Rich said:
Monness Crespi & Hardt raised their price target on shares of Datadog from $160.00 to $220.00 and gave the company a buy rating in a report on Friday, November 5th.
Morgan Stanley raised their price target on shares of Datadog from $164.00 to $200.00 and gave the company an overweight rating in a report on Sunday, November 7th.
Rosenblatt Securities upgraded shares of Datadog from a neutral rating to a buy rating and set a $175.00 price target on the stock in a report on Wednesday, February 2nd.
Needham & Company LLC lowered their price target on shares of Datadog from $236.00 to $190.00 and set a buy rating on the stock in a report on Tuesday.
Finally, Citigroup lifted their target price on shares of Datadog from $188.00 to $225.00 and gave the stock a buy rating in a research note on Friday, November 5th.
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
Furthermore, Hans Christensen, a Nobias 5-star rated author, published a similar piece, highlighting several more analyst pre-earnings updates. Christensen wrote:
Royal Bank of Canada raised Datadog from a “sector perform” rating to an “outperform” rating and increased their price target for the company from $191.00 to $235.00 in a research note on Friday, November 19th.
JPMorgan Chase & Co. cut shares of Datadog from an “overweight” rating to a “neutral” rating and lowered their price objective for the company from $212.00 to $195.00 in a research report on Tuesday, December 14th.
Mizuho lowered their price objective on shares of Datadog from $225.00 to $200.00 in a research report on Tuesday, January 18th.
Finally, Barclays lowered their price objective on shares of Datadog from $225.00 to $190.00 and set an “overweight” rating for the company in a research report on Wednesday, January 12th.
As you can see, coming into the 2/10/2022 earnings report, many of the large Wall Street firms were bullish on DDOG shares and it appears that this positive sentiment flowed into the earnings report reaction by the market.
Looking at the credible authors and Wall Street analysts that we track with the Nobias algorithm, this positive sentiment remains in place. 75% of the recent reports published by credible authors (those with 4 and 5-star ratings) have expressed a “Bullish” sentiment. And, looking at the credible (once again, only individuals with 4 or 5-star ratings) Wall Street analysts that we follow, we see that the average price target being applied to DDOG shares by this cohort is $210.50. Today, DDOG shares trade for $159.02. Therefore, this average price target implies upside potential of approximately 32.3%.
Disclosure: Of the stocks discussed in this article, Nicholas Ward is long AMZN. Nicholas Ward wrote this article for Nobias at their request with a view of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
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