Should You Add Datadog Stock to Your Growth Portfolio?

Datadog, Inc. (DDOG) is buying and selling underneath its 52-week excessive in spite of its spectacular first-quarter financials. With blended benefit margins and stretched valuation, is DDOG a treasured funding now? Read extra to determine. – StockInformation

With a $25.83 billion marketplace cap, Datadog, Inc. (DDOG) supplies a tracking and analytics platform for builders, IT operations groups, and trade customers within the cloud the world over.

The corporate’s SaaS platform gives infrastructure tracking, utility efficiency tracking, community efficiency tracking, log control, cloud safety, and incident control.

DDOG lately reported spectacular fiscal 2022 first-quarter effects. DDOG’s earnings higher 82.8% year-over-year to $363.03 million, whilst its non-GAAP gross margin rose 90.6% year-over-year to $291.74 million.

The corporate’s non-GAAP internet source of revenue and non-GAAP internet source of revenue consistent with percentage got here in at $83.84 million and $0.24, registering an build up of 316.1% and 300%, respectively, from the prior-year duration.

However, the traders had been bearish about DDOG because of its sky-high valuations, and occasional steadiness (with a beta of one.53), amid rising issues concerning the Fed’s competitive rate of interest hikes and a conceivable recession.

The inventory has plummeted 54% in worth year-to-date to near the day past’s buying and selling consultation at $81.99. Also, it has declined 38% over the last 3 months and 50% over the last six months.

DDOG is these days buying and selling 143.5% underneath its 52-week excessive of $199.68, which it hit on November 17, 2021.

Here’s what may just form DDOG’s efficiency within the close to time period:

Favorable Analyst Estimates

For the fiscal 2022 2nd quarter (finishing June 2022), analysts be expecting DDOG’s EPS and earnings to develop 50% and 62.4% year-over-year to $0.15 and $379.27 million, respectively.

The corporate’s EPS and earnings for the fiscal yr 2022 (finishing December 2022) are anticipated to come back in at $0.74 and $1.62 billion, representing a upward push of 54.2% and 56.3%, respectively, from the former yr.

In addition, its EPS is predicted to develop at 50.6% consistent with annum over the following 5 years.

Mixed Profitability

DDOG’s trailing-12-month gross benefit margin of 78.07% is 54.5% increased than the {industry} reasonable of fifty.53%. Its trailing-12-month levered FCF margin of 28.34% is 196.3% increased than {industry} averages of 9.56%.

However, DDOG’s trailing-12-month EBITDA margin of two.20% is 83.5% less than the 13.35% {industry} reasonable. And its trailing-12-month internet source of revenue margin of 0.17% is 96.8% less than the 5.34% {industry} reasonable.

Its trailing-12-month ROE, ROTC, and ROA of 0.21%, 0.14%, and zero.08% examine with {industry} averages of seven.67%, 4.76%, and three.01%, respectively. Moreover, its trailing-12-month asset turnover ratio of 0.53% is 16.5% less than the {industry} reasonable of 0.64%.

Stretched Valuation

In phrases of ahead non-GAAP P/E, DDOG is these days buying and selling at 110.11x, 562.1% increased than the {industry} reasonable of 16.63x. The inventory’s ahead EV/Sales more than one of 16.86 is 525.9% increased than the {industry} reasonable of two.69.

In addition, its ahead EV/EBITDA and Price/Sales ratios of 95.71 and 15.96 examine with {industry} averages of eleven.67 and a couple of.54, respectively.

Also, in the case of ahead Price/Cash Flow, DDOG is these days buying and selling at 65.86x, 326.7% increased than the {industry} reasonable of 15.43x.

Consensus Rating and Price Target Indicate Potential Upside

Of the 21 Wall Street analysts that rated DDOG, 18 rated it Buy, whilst 3 rated it Hold. The 12-month median worth goal of $163.58 signifies a 99.4% possible upside from the day past’s last worth of $82.03.

The worth objectives vary from a low of $125.00 to a excessive of $223.00.

POWR Ratings Depict Uncertainty

DDOG has an total ranking of C, which interprets to Neutral in our proprietary POWR Ratings machine. The POWR Ratings are calculated making an allowance for 118 distinct elements, with every issue weighted to an optimum level.

DDOG has a B grade for Sentiment, in step with its sure earnings and profits expansion estimates. However, DDOG has a D grade for Value, in sync with its higher-than-industry valuation ratios.

Of the 56 shares within the Software – Business {industry}, DDOG is ranked #30.

Beyond what I’ve said above, view DDOG rankings for Growth, Stability, Momentum, and Quality right here.

Bottom Line

Despite reporting promising newest quarterly effects, stocks of DDOG had been declining in recent years, owing to sky-high valuations and reasonably low steadiness.

Moreover, the inventory is these days buying and selling underneath its 50-day and 200-day shifting averages of $109.72 and $144.15, respectively, indicating a downtrend.

Due to the Fed’s hawkish tilt and an financial slowdown, the inventory is predicted to stay beneath power within the close to time period. Thus, traders will have to wait till the markets stabilize ahead of making an investment in DDOG.

How Does Datadog (DDOG) Stack Up Against its Peers?

While DDOG has a C ranking in our proprietary ranking machine, one may wish to believe having a look at its {industry} friends, Amdocs Ltd. (DOX), Software AG (STWRY), and Sapiens International Corporation N.V. (SPNS), that have an A (Strong Buy) ranking.

DDOG stocks closed at $85.63 on Friday, up $3.64 (+4.44%). Year-to-date, DDOG has declined -51.92%, as opposed to a -22.73% upward push within the benchmark S&P 500 index throughout the similar duration.

About the Author: Mangeet Kaur Bouns

Mangeet’s prepared pastime within the inventory marketplace led her to turn into an funding researcher and fiscal journalist. Using her elementary strategy to inspecting shares, Mangeet’s seems to be to assist retail traders perceive the underlying elements ahead of making funding choices.


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