On Friday, TD Cowen analysts maintained a positive outlook on Datadog (NASDAQ:DDOG), reiterating their Buy rating and setting a price target of $165.00. The firm anticipates a strong finish for Datadog's fourth quarter, expecting revenue growth of approximately 25%, which surpasses the higher end of the company's own guidance of 21%. This optimism aligns with InvestingPro data showing impressive last twelve-month revenue growth of 26.3% and an overall financial health rating of "GOOD."
Looking ahead, TD Cowen forecasts a fiscal year 2025 guide of 19-20% growth for Datadog, which is anticipated to exceed market expectations. The sentiment around the stock has recently turned bearish, but the analysts believe that the upcoming guidance should alleviate investor concerns, as it did the previous year. With an industry-leading gross profit margin of 81.24% and strong cash position, InvestingPro analysis reveals 12 additional key insights available to subscribers.
The valuation of Datadog is seen as attractive by TD Cowen, with the stock trading at 43 times its estimated calendar year 2026 enterprise value to free cash flow (EV/CY26E FCF). The firm has selected Datadog as its top pick and Best Idea for 2025, citing its unique position in the market. Despite a recent dip of 16% from its early December high of $168, compared to a 7% decline in the EMCLOUD index, Datadog's nearly $3 billion in annual recurring revenue (ARR) and mid-20s free cash flow (FCF) margins underscore its rarity and potential for growth. According to InvestingPro, analyst targets range from $128 to $230, with a strong consensus recommendation of 1.54 (where 1 is Strong Buy).
The analysts also see the possibility of Datadog's inclusion in the S&P 500 as an additional catalyst for the stock within the year. The reiterated Buy rating and $165 price target, which reflects approximately 50 times the company's estimated calendar year 2026 EV/FCF, underscores TD Cowen's confidence in Datadog's performance and market position.
In other recent news, Datadog has reported a 26% year-over-year revenue increase, reaching $690 million. Guggenheim maintains a neutral position on Datadog, influenced by the stock's current valuation and potential risks associated with the company's guidance. The firm projects a 23% growth for the company in FY25. However, Morgan Stanley (NYSE:MS) has downgraded Datadog's stock to Equal-weight, citing a balanced risk-reward scenario. UBS maintains a Buy rating on Datadog, raising its price target to $175 from $150, highlighting the company's long-term growth opportunities. Loop Capital also maintains a Buy rating, projecting a significant Free Cash Flow of $7.9 billion by FY34. Additionally, Datadog has expanded its Board of Directors with the appointment of Amit Agarwal. These are recent developments that highlight the growing confidence in Datadog's long-term growth prospects.
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