Wolfe Research Analyst Upgrades Stock to Outperform with $140 Target Price
Datadog Inc.'s monitoring tools have become increasingly indispensable for engineers, according to Wolfe Research analyst Alex Zukin. In a note to clients, he upgraded the company's shares from peer perform to outperform and set a target price of $140.
Datadog shares (DDOG) saw a premarket increase of over 3% on Tuesday after closing at $111.49 on Monday.
Previously, Zukin had concerns about Datadog's growth deceleration, which materialized more significantly than anticipated. However, he now expects the company to experience a more favorable environment moving forward.
Zukin's industry conversations indicate that optimization challenges are subsiding, competition is easing, and go-to-market execution has improved. Additionally, Datadog could benefit from the growing interest in generative artificial intelligence, potentially positioning itself as the fastest-growing software company.
Signs of Stability for Datadog as Hyperscaler Earnings Indicate Consumption Trends
Datadog, a prominent cloud monitoring and analytics platform, may be experiencing a turnaround in user engagement, according to recent analysis. Analysts have taken note of positive channel checks and web metrics related to Amazon.com Inc.'s AWS cloud-computing service, which historically provide insights into Datadog's performance.
While the second quarter showed a decline in engagement, there are indications that a bottom is being reached, barring any unforeseen macro effects. This could potentially pave the way for a gradual improvement in user interaction. It's worth mentioning that AWS revenue typically lags behind web metrics by approximately a quarter, meaning there's also reason to anticipate a rebound in the next quarter.
Peter Weed, an analyst at Bernstein, maintains an outperform rating on Datadog shares with a target price of $127. His optimistic outlook is supported by these emerging signs of stability and the prospect of positive momentum in engagement.
As the world increasingly relies on cloud computing, the performance of hyperscalers like AWS plays a crucial role in understanding consumption trends and the overall health of companies like Datadog. The upcoming earnings report on August 8th will shed further light on these developments.
In conclusion, while Datadog still faces challenges in maintaining consistent user engagement, recent indicators suggest that stabilization is within reach. Analysts and investors will closely monitor the forthcoming earnings report and the performance of hyperscaler companies for further insights into Datadog's trajectory.
