Datadog, Inc. (DDOG) is a monitoring and security platform for cloud applications with its software-as-a-service (SaaS) platform helping developers and IT teams monitor computer infrastructure. Increasing adoption of remote working by corporations, thanks to the pandemic, has made cloud-computing one of the hottest industries right now. In fact, DDOG’s tools also monitor business workloads deployed on Amazon Web Service (AWS) and Microsoft’s (MSFT) Azure Network.
With the companies relying heavily on sturdy tech infrastructure, DDOG is set on a growth path. The stock has gained 197% year-to-date. This impressive performance and the potential upside based on a number of factors, has helped the stock earn a “Strong Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates DDOG:
Trade Grade: A
DDOG is currently trading above its 50-day and 200-day moving averages of $90.81 and $75.08, respectively, indicating an uptrend. Moreover, DDOG has gained 203.7% over the past six months, reflecting solid short-term bullishness.
DDOG’s revenue increased 68% year-over-year to $140 million for the quarter that ended June 2020. It reported a net income of $284,000 for this period, which is a significant improvement from the negative value in the prior-year quarter. Customers with annualized run rate subscriptions grew 71% from the same period last year to 1,015 customers.
DDOG achieved FedRAMP authorization for low-impact SaaS and is now fully available in the FedRAMP marketplace. The company announced a strategic partnership with Microsoft Azure on September 30th, signifying that it will be available as a first-class service within the Azure Portal.
In the words of Olivier Pomel, co-founder and CEO of Datadog said, “Our growth at scale amid the global pandemic demonstrates Datadog’s importance in enabling the digital operations of our customers. COVID-19 has illuminated the need to be digital-first and agile, as well as the cloud as the IT architecture of choice to achieve these outcomes.”
Buy & Hold Grade: A
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade takes into account, DDOG is well positioned. The stock is currently trading just 2% below its 52-week high of $114.55, which it hit on October 9th.
While DDOG went public only last year, it has a promising outlook. The growth of the global cloud computing market has backed its growth since its IPO. The stock gained 214.6% in the past year alone, with an 80.8% year-over-year growth in revenue.
Peer Grade: A
DDOG is currently rated #2 out of 48 stocks in the Software-Business industry. Other popular stocks in the software-business group are Salesforce.com Inc (CRM), ServiceNow, Inc. (NOW), and Autodesk, Inc. (ADSK).
CRM, NOW and ADSK have gained 62.2%, 80.3% and 32% year-to-date, respectively, versus DDOG’s 197% returns over this period.
Industry Rank: B
The Software-Business industry is ranked #29 out of the 123 StockNews.com industries. With the world going digital, there has been an increased demand for improved technological advancements and the software business industry plays a key role in helping with the transformation.
Overall POWR Rating: A (Strong Buy)
DDOG is rated “Strong Buy” due to its short-and-long-term bullishness, solid growth prospects, and underlying industry strength, as determined by the four components of our overall POWR Rating.
DDOG has the potential to soar in the upcoming months despite gaining 197% so far this year, based on its continued business growth, favorable earnings and revenue outlook, and strong financials.
Analyst sentiment, which gives a good sense of a stock’s future price movement, is pretty impressive for DDOG. It has an average broker rating of 1.5, indicating a favorable analyst sentiment. Out of 14 Wall Street analysts that rated the stock, 9 rated it “Strong Buy.” Moreover, DDOG has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $144.31 million for the quarter that ended September 2020, indicates 50.5% growth from the same period last year. Its EPS is expected to grow at 25% next year. This outlook should keep DDOG’s price momentum alive in the near term.
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DDOG shares were trading at $116.50 per share on Tuesday afternoon, up $4.30 (+3.83%). Year-to-date, DDOG has gained 208.36%, versus a 10.72% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...
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