JPMorgan upgrades Datadog, advises ‘patient, opportunistic accumulation’

JPMorgan analyst Mark Murphy upgraded Datadog to Overweight from Neutral with a price target of $115, up from $90, following the company’s quarterly report, noting that the firm’s work has shown that an optimization trough for hyperscalers could occur close to the end of this year or very early in 2024. The firm reminds that shares peaked at nearly $200 per share in 2021 and “have produced zero return for the past three years,” while adding that investors have recently endured “a series of guide-belows / guide-downs.” However, the firm views Datadog as the “Top Dog in Monitoring” with a cohesive, organic, converged Observability platform that is displacing a patchwork of legacy niche tool. While appreciating that shares are “likely seeing short-squeeze activity today,” the firm does not see the stock revisiting its prior lows again in the near-term and advises that investors manage any short-term volatility by “patient, opportunistic accumulation of shares during pullbacks.”