Shares of Datadog (NASDAQ:DDOG) fell in Monday’s trading after Bank of America analyst Koji Ikeda downgraded the stock’s rating from Buy to Neutral while also lowering the price target from $123 to $105.
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In a note to investors, Ikeda noted his concerns about the company’s products, citing increased competition and potential AI-related growth delays. He stated that while the company’s business has potential upsides, it also has downside revenue risks.
Furthermore, demand appears to be an issue, as the analyst wrote in a note to clients saying, “The demand environment has not meaningfully improved based on recent checks with developers, SREs, partners, and SIs.” He then continued with, “Our demand checks and scenario analysis suggest downside revenue risk. We lowered estimates to below consensus: 2024 revenue to $2.4bn (5% below Street); and 2025 revenue to $2.9bn (12% below Street).”
Furthermore, Ikeda pointed to the company’s product pricing, which he said “could drive the end-market to lower-cost competitors.” He added that growing and open-source alternatives to its products could also affect its revenue and limit its NRR expansion.
Is Datadog a Buy or Hold?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on DDOG stock based on 21 Buys, nine Holds, and zero Sells assigned in the past three months, as indicated by the graphic above. Nevertheless, the average price target of $107.38 per share implies a 17.97% upside potential.
