Cybersecurity firm Datadog (DDOG) proved that a solid earnings report is generally a recipe for big gains. It’s even better when subsequent guidance proves positive as well. That’s just the scenario that Datadog enjoyed in recent trading. With solid results coming in and no end in sight for the good news, it’s hard not to be bullish on Datadog’s outlook for at least the next quarter.
Datadog’s year in share prices features a lot of upward momentum. Last February, the company started a bit of a slump that saw it drop from around $112 to just over $77 in about a month. The company generally held in the $77 to $87 per share range for roughly the next two months.
After it hit its low point for the year around $71 on May 5, it started a continual climb. By August 5, the company burst over the $130 mark. DDOG continued to gain ground until its peak around November 8. The company briefly challenged the $200 per share mark but found it untenable and began a retreat immediately thereafter.
A substantial plunge closed out 2021 for Datadog, falling from $178 ahead of New Year’s to around $145 on January 4. Another slide followed, and then a recovery, which brings us to today.
Datadog’s ongoing partnership with Amazon (AMZN) and Amazon Web Services proved to be a saving grace for DDOG. The company’s revenue reached $326.2 million, a jump of 84%, thanks in large part to that partnership.
Earnings were also well ahead, coming in at $0.20 per share, more than three times what they were the previous year at $0.06. Meanwhile, analyst expectations were shattered by Datadog’s results. Analysts were looking for earnings of $0.11 per share with $291.5 million in revenue.
Wall Street’s Take
Turning to Wall Street, Datadog has a Strong Buy consensus rating. That’s based on 11 Buys and one Sell assigned in the past three months. The average Datadog price target of $196.82 implies 7.4% upside potential.
Analyst price targets range from a low of $175 per share to a high of $220 per share.
This Dog Fetched a Big Win
Datadog delivered a big win, indeed, and just as readily as if it were dispatched to fetch the morning paper. The partnership with Amazon Web Services was definitely a help, as it exposed substantial new markets to Datadog’s operations.
With Datadog focused on cybersecurity—including cloud monitoring as a service—that gave it a particular assist in a field where cybersecurity is more vital than ever to online operations. From businesses to individuals, cybersecurity has taken on a whole new life. As we increasingly work remotely and manage online operations from all over the world, protecting those operations is now vital to their ongoing productivity.
That’s good news, but is it enough to maintain this new winning streak? Maybe, maybe not, but Datadog isn’t taking that chance. It’s already working to build further improvement from here, thanks to its recent acquisition of CoScreen.
With CoScreen’s tools a part of Datadog’s lineup, users will get improved access to real-time collaboration tools. Users will be able to effectively share their screens and work together to address security incidents as they happen, improving response times and efficacy to produce a better overall outcome.
Additionally, just two weeks ago, Datadog added integration with LambdaTest systems. The result, now available in the Datadog Marketplace, will allow for “…cross-browser testing of websites (and web apps) from the LambdaTest platform to Datadog.”
Improving functionality is generally good news. Throw in some solid fundamentals, and Datadog is looking like a very attractive stock. With its stock currently at ~$182, DDOG is already trading close to its lowest price target of $175.
Granted, Datadog’s dividend history is nonexistent. That isn’t a mark in its favor. However, this is much less an income stock than it is a potential growth stock. Even as high as the per-share price is right now, there’s still plenty of room for growth before it hits the average price target, let alone the high.
Concluding Views
Datadog is starting to look like anything but a dog. It’s starting to look like a solid performer. A recent dip provides a nice buy-in point, and ongoing development in Datadog’s systems keeps it from seeming stale and unattractive. Its connection to Amazon Web Services will likely continue to provide steady access to new users who will find value waiting.
All of these factors added together make for an excellent case for bullishness. Datadog shares may be pricey right now, but their potential for adding value to users and shareholders alike looks solid as well. Sometimes, you really do get what you pay for.
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