- Provides mission-critical tools to enterprises
- Growing total addressable market
- 40% share price upside, say analysts
Analysts at US investment bank Oppenheimer are telling clients that Datadog (DDOG:NASDAQ) should be a core long-term holding despite near-term risks to growth stocks.
Datadog won’t be a familiar name to many but it holds promise of being a good boy for investors. The $24 billion Manhattan-based business provides a software-as-a-service suite that allows clients to monitor and analyse cloud-scale applications.
MISSION-CRITICAL CLOUD APPLICATIONS
This means monitoring servers, databases, tools, and services across major Cloud providers, including Amazon’s (AMZN:NASDAQ) AWS, Microsoft (MSFT:NASDAQ) Azure, Alphabet’s (GOOG:NASDAQ) Google Cloud and many others.
‘The company’s unified, real-time view into the entire technology stack remains mission-critical to developers and enterprises as they focus on identifying and eliminating performance issues,’ wrote Oppenheimer’s analysts in a note to clients. ‘While not recession-proof, the mission-critical nature of its solutions gives Datadog relative resiliency in times of spending constraints,’ they said.
The analysts also weighed in positively on the company’s expansion efforts into security, which facilitates further TAM enlargement, or total addressable market.
40% SHARE PRICE UPSIDE, SAY ANALYSTS
Oppenheimer also noted Datadog’s high-teens percentage free cash flow and operating margins, while growing revenue above 30% a year on average.
Datadog has beaten quarterly forecasts every time over the past three years.
All-in-all, Oppenheimer’s analysts say Datadog offers a rare combination of growth and profit. Datadog shares have struggled this year as rising interest rates put growth stocks in investors’ doghouse, losing 53% in 2022 to the current $76.05.
Oppenheimer sees scope for the share price to rally back to $105 during 2023.
