Datadog’s Strong Growth and Strategic Expansion Justify Buy Rating and Raised Price Target

Andrew Sherman, an analyst from TD Cowen, reiterated the Buy rating on Datadog. The associated price target was raised to $175.00.

Andrew Sherman has given his Buy rating due to a combination of factors that highlight Datadog’s strong performance and growth potential. The company’s revenue growth exceeded expectations, with a notable increase from AI-native customers contributing significantly to year-over-year revenue. Additionally, the company’s current remaining performance obligations (cRPO) and net revenue retention (NRR) have shown acceleration, indicating strong customer engagement and expansion.
Moreover, management’s strategic focus on expanding sales capacity, particularly internationally, and the de-risked guidance for the second half of the year further bolster confidence in Datadog’s future performance. Despite market concerns about churn risk related to OpenAI, Sherman believes that the core use cases for ChatGPT are unlikely to experience significant churn, as evidenced by Datadog’s high enterprise gross retention rate. Trading at a favorable valuation, Datadog remains a top pick, leading Sherman to reiterate a Buy rating and raise the price target to $175.

Sherman covers the Technology sector, focusing on stocks such as JFrog, PagerDuty, and Dynatrace. According to TipRanks, Sherman has an average return of 10.9% and a 63.49% success rate on recommended stocks.

In another report released today, Monness also maintained a Buy rating on the stock with a $185.00 price target.