Stifel analyst Brad Reback has adjusted his price target for Datadog (DDOG, Financial), reducing it from $125 to $120, while maintaining a Hold rating on the stock. This decision follows Datadog's announcement of a 3% increase in revenue, surpassing expectations, and an upward revision to its fiscal year 2025 guidance, which notably includes a robust forecast for the second quarter.
Despite these positive developments, the company is facing challenges with its operating margins for FY25. These challenges arise from increased cloud expenses due to a surge in usage from its largest customer, OpenAI. However, management is confident that these issues will be addressed soon, and they anticipate maintaining gross margins above 80% in the long run.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 33 analysts, the average target price for Datadog Inc (DDOG, Financial) is $141.46 with a high estimate of $175.00 and a low estimate of $87.00. The average target implies an upside of 33.64% from the current price of $105.86. More detailed estimate data can be found on the Datadog Inc (DDOG) Forecast page.
Based on the consensus recommendation from 43 brokerage firms, Datadog Inc's (DDOG, Financial) average brokerage recommendation is currently 2.0, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Datadog Inc (DDOG, Financial) in one year is $184.29, suggesting a upside of 74.1% from the current price of $105.855. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Datadog Inc (DDOG) Summary page.
DDOG Key Business Developments
Release Date: February 13, 2025
- Revenue: $738 million, up 25% year over year.
- Free Cash Flow: $241 million with a free cash flow margin of 33%.
- Customer Growth: Approximately 30,000 customers, up from about 27,300 a year ago.
- Large Customers: 3,610 customers with an ARR of $100,000 or more, up from 3,190 a year ago.
- ARR Milestone: Total ARR exceeds $3 billion.
- Infrastructure Monitoring ARR: Over $1.25 billion.
- Log Management ARR: Over $750 million.
- APM Products ARR: Exceeds $750 million.
- Gross Margin: 81.7%.
- Operating Income: $179 million with a 24% operating margin.
- Cash and Equivalents: $4.2 billion.
- Billings: $908 million, up 26% year over year.
- RPO: $2.27 billion, up 24% year over year.
- Net Revenue Retention: High 110s percentage.
- Gross Revenue Retention: Stable in the mid to high 90s.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Datadog Inc (DDOG, Financial) reported a strong Q4 2024 with revenue of $738 million, a 25% increase year over year, exceeding the high end of their guidance range.
- The company achieved significant customer growth, ending the year with approximately 30,000 customers, up from 27,300 the previous year.
- Datadog Inc (DDOG) saw a record in bookings for Q4, marking their first-ever quarter with over $1 billion in bookings.
- The company continues to expand its platform adoption, with 83% of customers using two or more products and 50% using four or more products.
- Datadog Inc (DDOG) achieved a milestone with their total ARR exceeding $3 billion, driven by growth in infrastructure monitoring, log management, and APM products.
Negative Points
- Despite strong revenue growth, Datadog Inc (DDOG) experienced some optimization and volume discounts related to contract renewals in Q4.
- The company's operating margin decreased to 24% in Q4 from 28% in the year-ago quarter, indicating increased operational expenses.
- Datadog Inc (DDOG) noted that some customers remain cost-conscious, impacting their cloud usage growth.
- The company faces challenges in converting bookings into immediate revenue growth, as bookings do not translate directly into revenue.
- There is potential volatility in revenue growth due to the backdrop of long-term volume growth and customer renewals on different terms.
