It’s been a long day for cloud software stock Datadog (NASDAQ:DDOG), and it’s only about half over. It offered up its earnings report and saw shares plunge over 14% at one point in the premarket. However, it has brought itself back from most of those losses and is now down only about 4% in Tuesday afternoon’s trading.
The earnings report itself looked pretty good for Datadog, thanks in large part to $589.6 million in revenue, which was up 26% against the fourth quarter of 2022’s figures. Customers with average recurring revenue over $1 million also increased, up from 317 in 2022’s fourth quarter to 396 in 2023’s fourth quarter.
However, projections proved a lot more disappointing. Datadog expects earnings per share between $1.38 and $1.44, with revenue coming in between $2.555 billion and $2.575 billion during Fiscal Year 2024. On the other hand, analysts were looking for earnings of $1.78 per share and $2.59 billion in revenue. That was enough to prompt a fall in share prices.
The First Quarter Might Be a Problem
TD Cowen analyst Andrew Sherman notes that the first quarter “looks light,” and so far, that seems to be the case. Datadog looks for the first quarter to start off slow, with revenue coming in between $587 million and $591 million. That would mean just about $1 million in extra revenue from the preceding quarter, which opens up the possibility of no growth at all or even a loss. And that’s going to make the full-year goal that much harder to achieve, even if it looks for much bigger growth in the rest of 2024.
What Is the Outlook for Datadog?
Turning to Wall Street, analysts have a Strong Buy consensus rating on DDOG stock based on 15 Buys and five Holds assigned in the past three months, as indicated by the graphic below. After a 51.82% rally in its share price over the past year, the average DDOG price target of $137.58 per share implies 5.3% upside potential.
