Datadog (DDOG) PT raised to $133 at Bernstein, says "FY24 growth may be nearly 2x vs. consensus!"

Bernstein analyst Peter Weed raised the price target on Datadog (NASDAQ: DDOG) to $133.00 (from $127.00) while maintaining an Outperform rating.

"Into last Tuesday's earnings we worried about over-exuberance, and saw it as a possible discount buying opportunity if it came to fruition. It did! And then we encouraged investors to buy the cut, while consensus went the opposite direction, reducing FY24E growth from ~27% pre-earnings to 23.2% as we write this note. Today we lay out the evidence that investors should think GROWTH (not deceleration)! And consensus' quarterly YoY growth expectations could be off by as much as ~1/2 in 2024, as the company growth may rebound to ~40% or more in a year (before slowing to still heady >30% levels in 2025). And what comes with growth? MARGINS! Hiring plans tend to remain steady, which may cause a bubble of margin expansion during 2024."

"What gives us such confidence? Its mechanical, driven by how cohorts of Datadog customers flow through over the coming year(s). Two things will help NTM re-acceleration regardless of macro getting a lot better (our base model assumes '24-25 IT budget growth remains at the '22-'23 level of 2-3% YoY): a) customer mix weighted back towards newer faster growing companies, b) cloud rationalization will end. And if VC investing gets back to pre-COVID levels (we think it does), it provides even further lift. There are even up-side cases if things like AI would cause higher IT budget growth (not in our model)."

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