Datadog (DDOG) is the unseen force keeping modern cloud applications in check, tracking performance and security in real-time. As artificial intelligence (AI)-driven cloud adoption accelerates, its mission-critical insights keep businesses agile, preventing failures and cyber threats.
But even the best-run companies hit turbulence. Recently, Datadog hit a rough patch, with its stock sliding over 8% on Feb. 13 despite a strong fourth-quarter 2024 performance. The numbers beat expectations, but cautious guidance and slower customer spending sparked fears of an earnings dip.
Yet, this slump may be the perfect setup for a major rebound. Datadog is no ordinary tech player - it’s a leader in a booming industry. With AI integration fueling demand for smarter monitoring solutions and a massive market ahead, analysts see room for a powerful comeback, projecting over 76% upside in 2025.
To that end, investors should add this “Strong Buy”-rated stock to their portfolio before the market wakes up to its true potential.
About Datadog Stock
Datadog (DDOG), headquartered in New York, seems to be the backbone of modern cloud operations. In an age where businesses rely on seamless digital performance, its monitoring and analytics platform ensures everything runs smoothly for developers, IT teams, and business users.
With a market cap of $40 billion, Datadog’s influence spans across industries. Its portfolio boasts over 400 out-of-the-box integrations, covering public and private clouds, on-premise hardware, databases, and third-party software. The company’s revenue comes from subscription sales, reinforcing its role as an essential service in today’s digital-first world.
Over the past 52 weeks, DDOG stock has tumbled 12.4%, currently sitting 33% below its 52-week high of $170.08 and trailing behind the broader S&P 500 Index's ($SPX) gains.
Despite a slower gain, DDOG trades at 70.78 times forward earnings and 12.80 times sales, which are well above sector medians of 24.30x and 3.16x, respectively. The premium pricing signals market confidence in the company’s long-term growth.
Datadog Beats Q4 Earnings
On Feb. 13, the cloud powerhouse unveiled its fiscal 2024 fourth-quarter earnings, surpassing expectations on both revenue and profits. Revenue surged to $738 million, marking a 25.1% increase from the previous year and outpacing analyst predictions of $714 million. Non-GAAP EPS amounted to $0.49, beating the $0.43 consensus estimate and rising 11.4% year-over-year.
The company ended the quarter with approximately 30,000 customers, up from 27,300 a year ago. More impressively, the number of customers generating at least $1 million in annual recurring revenue (ARR) grew 17% to 462, while those contributing $100,000 or more increased 13% to about 3,610.
However, the spotlight quickly shifted to Datadog’s guidance. While the company projects steady growth, its first-quarter and full-year forecasts landed softer-than-expected. Full-year adjusted EPS projections between $1.65 and $1.70 range fell below Wall Street’s high-end expectations.
Even so, the long-term picture remains promising. With a mid-20% CAGR expected over the next seven years, DDOG’s lofty 80x price multiple in 2025 could drop below 10x without any change in share price.
Looking ahead, analysts forecast fiscal 2025 first-quarter EPS at $0.08, a sharp 50% decline year-over-year. Full-year EPS is expected to be $0.34 before bouncing back in 2026 with a 67.7% surge to $0.57.
What Do Analysts Expect for Datadog Stock?
Datadog’s guidance may have been underwhelming, but the stock still holds promise. Analysts at Goldman Sachs Group remain optimistic about its strategic positioning as a key player in infrastructure software and observability. Reinforcing their confidence, Goldman Sachs reiterated a “Buy” rating with a $162 price target.
Overall, DDOG has a solid “Strong Buy” consensus rating, reflecting analysts’ bullishness on DDOG. Among 39 analysts covering DDOG, 28 advocate a “Strong Buy,” while three recommend a “Moderate Buy.” Meanwhile, eight analysts suggest a “Hold.”
DDOG’s average analyst price target of $158.94 represents potential upside of 40%, while the Street-high target of $200, reiterated by Macquarie, suggests that the stock can climb as much as 76% from here.
