On Thursday, TD Cowen maintained a positive outlook on Datadog (NASDAQ:DDOG) shares, reiterating a Buy rating and a price target of $155.00. The firm's anticipation of the company's second-quarter earnings report, expected in early August, is for a performance exceeding guidance, predicting approximately 27% revenue growth over the guided 22%.
The firm's confidence is bolstered by feedback from Datadog's user conference, DASH, which indicated stable spending, enthusiasm for new products, and successful customer acquisitions from competitors. Furthermore, the upcoming Olympics are expected to boost third-quarter usage of Datadog's monitoring and analytics platform.
TD Cowen also introduced its long-term estimates for the fiscal year 2026, suggesting that Datadog's current trading at around 38 times its expected enterprise value to free cash flow (EV/FCF) presents an attractive investment opportunity.
Additionally, the firm noted that GitLab (NASDAQ:GTLB) does not align with Datadog's merger and acquisition criteria, implying a strategic focus for Datadog in its growth and investment activities.
The analyst's statement highlighted the rationale behind the sustained Buy rating and price target: "We see a good entry point, reiterate Buy & $155 PT." This indicates a steady belief in the company's growth prospects and its position in the market.
In other recent news, GitLab Inc. is reportedly exploring a potential sale, with Datadog Inc . identified as one of the interested parties. Mizuho Securities and Wolfe Research have both maintained their Outperform rating for GitLab, highlighting the strategic fit between the two companies.
GitLab, which reported a 33% year-on-year revenue growth to $169.2 million, is seen as an attractive target due to its strong growth prospects.
On the other hand, Datadog has received positive feedback from several analyst firms, including Mizuho Securities and Evercore ISI, who maintain their positive ratings citing potential for revenue growth, product expansion, and market leadership. However, Monness, Crespi, Hardt downgraded Datadog due to valuation concerns.
These developments come amidst reports of GitLab's potential sale and Datadog's interest in the acquisition. Both companies are making significant strides in the software development industry, with GitLab's potential sale drawing attention due to the strategic fit with Datadog's offerings.
InvestingPro Insights
As Datadog (NASDAQ:DDOG) approaches its second-quarter earnings report with positive expectations from analysts, key financial metrics from InvestingPro further illuminate the company's current standing. With a robust market capitalization of $40.53 billion, Datadog showcases its financial strength. The company's impressive gross profit margin over the last twelve months as of Q1 2024 stands at 81.42%, underpinning its efficiency in generating earnings relative to revenue. Additionally, Datadog's revenue growth remains strong, with a 25.87% increase over the last twelve months as of Q1 2024, indicating sustained business expansion.
InvestingPro Tips highlight that Datadog holds more cash than debt, suggesting a solid liquidity position which could be crucial for future investments or weathering economic downturns. Moreover, the company's net income is expected to grow this year, which could be a positive signal for investors looking for profitability. With 12 additional InvestingPro Tips available, including insights on valuation multiples and profitability forecasts, investors can gain a comprehensive understanding of Datadog's financial health. For a deeper dive into these metrics and to access exclusive content, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at InvestingPro.
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