DA Davidson Upgrades Datadog to Buy

Investing.com — DA Davidson upgraded Datadog (NASDAQ: DDOG) to Buy on Tuesday, noting the company’s ability to sustain a 20%+ growth rate into 2025 and beyond.

Analysts at DA Davidson highlighted Datadog’s “increasingly rare growth profile” in a challenging software environment where sustained growth is hard to achieve. They view Datadog as a best-in-class company with a strong competitive moat, emphasizing that observability spending remains crucial for enterprises.

DA Davidson asserts that Datadog is well-positioned as a leader in the space, with recent data indicating rising demand. They pointed out that the observability market presents an attractive opportunity, predicting a total addressable market (TAM) of $62 billion by 2026, with a CAGR of 10.9%.

They indicated that Datadog is outpacing the market, growing at approximately 27% and is expected to benefit from the shift of IT workloads from on-premise to cloud solutions.

Additionally, Datadog is often referred to as the “Easy Button” of observability software, known for its user-friendly platform and out-of-the-box integrations. DA Davidson’s insights from industry experts underscore Datadog’s cost-optimized back-end engine, driving customer adoption and positioning the firm for long-term success.

Moreover, analysis of developer data showed a positive inflection point, signaling improving demand trends. Discussions with management suggested growing enterprise interest, indicating potential for further revenue growth over the next 12 months.

With a raised price target of $140 (up from $115), DA Davidson believes that Datadog’s traction with enterprise customers and expanding use cases will continue to propel growth. They concluded that the company commands a premium over similar growth peers given the anticipated upside in revenue growth, especially in a software landscape where growth is scarce.