Cloud stocks have had a rough run of things lately. Now, Datadog (NASDAQ:DDOG) is struggling as well, as a new analyst report suggests that Datadog is likely to falter against its contemporaries in the field. Investors took the suggestion to heart and abandoned Datadog, with shares down nearly 3% in Wednesday afternoon’s trading.
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The analyst report in question comes from Stifel, who not only dropped Datadog from a Buy to a Hold, but also cut the price target from $115 to $90. Datadog’s earnings report proved to be something of a mixed bag. While its second quarter earnings delivered solid enough results, its outlook for the 2023 fiscal year was much less encouraging. That in turn led to Stifel’s downgrade, even if Stifel wasn’t exactly happy about it, noting that downgrading a stock after it took a roughly 17% drop is “clearly suboptimal.”
But Datadog wasn’t the only victim here. The WisdomTree Cloud Computing Fund (WCLD) fell as much as 3% in Wednesday’s trading. It’s rallied somewhat in the meantime, but it’s still down in today’s trading. Some believe this is traceable to a general decline in cloud computing purchasing. That makes some sense; we’ve seen companies reconsidering purchases in cybersecurity, which, at least in theory, is more urgent a purchase than cloud systems. Since Datadog provides security for cloud systems,it’s got a toe in both waters, and makes it a little more susceptible to moves in either market.
And yet, analysts soldier on. With 17 Buy ratings and six Hold, Datadog stock is considered a Moderate Buy by analyst consensus. Further, with an average price target of $109.38, Datadog stock offers investors a 27.78% upside potential.
