Datadog (DDOG) Leaps After Beatings Q1 and Guidance Estimates, Sparking an Upgrade to 'Buy'

May 7, 2021 9:16 AM EDT
Get Alerts DDOG Hot Sheet
Price: $96.54 -0.73%

Rating Summary:
    12 Buy, 10 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 10 | Down: 8 | New: 61
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Shares of Datadog (NASDAQ: DDOG) traded 9.3% higher in early Friday trading after the company recorded revenue growth of 51% YoY.

DDOG posted revenues of $198.5 million to top the consensus of $186.71 million. Earnings per share (EPS) came in at $0.06 per share to top the $0.03 expected from analysts.

“We are pleased with our strong first quarter results, an excellent start to the year that demonstrated continued high growth at scale,” said Olivier Pomel, co-founder and CEO of Datadog.

“We continue to innovate at a rapid pace, delivering new products and features that leverage the strength of our observability platform to create value for our customers."

On the guidance front, Datadog sees a Q2 revenue outlook of $211 million to $213 million, which is above the analyst consensus of $196.6 million. EPS is projected to come between $0.03 and $0.04, with the midpoint coming in higher than $0.03.

For the full year, DDOG expected sales between $880 million and $890 million, with the midpoint of $885 million coming slightly ahead of the $833.73 guidance. Earnings per share are seen in a range of $0.13 per share to $0.16 per share, again higher than the $0.14 per share expected.

Berenberg analyst Kingsley Crane upgraded the stock to a “Buy” from “Hold” and reiterated its $111.00 per share price target.

“In our October initiation, we expressed concerns that the valuation had baked in much of the long-term market opportunity. We believe that with the stock trading 39.4% off its all-time high of $117.85 in February (compared to the Nasdaq Composite Index down 2.7% and the S&P Software & Services Select Industry Index off 11.0%), the risk-reward is significantly more favorable. The strong start to 2021 was characterized by meaningful introduction of new integrations, strong new logo generation, and both top-and bottom-line beats. Current valuation allows us to further appreciate the company’s leadership in observability, positioning to grab security spend, and the msuperior GTM approach,” the analyst said in a memo.

Needham analyst Jack Andrews sees an upside of over 100% on a Buy-rated DDOG after raising the price target to $150.00 per share from $141.00 per share.

“Strength in the quarter was driven by continued new logo momentum (DDOG's second-highest quarter of new logo ARR preceded only by 4Q20), stronger than anticipated usage trends that are now above historical levels, and a record number of new large accounts. Moreover, DDOG continues to benefit from an ongoing cross-sell opportunity as it invests in a largely greenfield application security opportunity and executes on selling new products (i.e. Continuous Profiler and Incident Management now both GA). We believe these new capabilities will create further leverage to the growing demand for Observability platforms and should drive continued cross-sell momentum,” Andrews writes in a note sent to clients.

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