On Wednesday, Stifel, a financial services firm, maintained its Buy rating on shares of Datadog (NASDAQ:DDOG) with a price target of $140.00. The reaffirmation of the stock's status came amid reports that GitLab may be considering a sale due to acquisition interest. Datadog has been named as one of the potential buyers interested in GitLab, as per a news story released Wednesday morning before the market opened.
Datadog, known for its cloud monitoring services, is seen as a continuous evaluator of mergers and acquisitions opportunities. However, Stifel notes that despite the rumors, GitLab might not be the ideal match for Datadog. The reasoning provided highlights that Datadog has been focusing on enhancing its offerings in Cloud Service Management and expanding its Cloud Security platform.
The analyst from Stifel pointed out that although Datadog's management is likely to consider a significant acquisition to strengthen its platform, particularly in the area of security within the DevSecOps market, GitLab may not be the solution Datadog is looking for. Google (NASDAQ:GOOGL) Ventures, with a 22% voting control in GitLab, is a significant stakeholder that could influence any potential sale.
Stifel's outlook suggests that while Datadog is open to strategic acquisitions to bolster its services, the company's current trajectory emphasizes on end-to-end decision, action, and automation platforms. The firm anticipates that Datadog might engage in a multi-billion dollar acquisition in the medium term to enhance its capabilities, but it remains uncertain if GitLab would be part of those plans.
In other recent news, GitLab Inc. is reportedly considering a potential sale amid acquisition interest, with Datadog Inc . identified as a potential buyer. The interest in acquisition follows GitLab's reported 33% year-on-year revenue growth to $169.2 million and its achievement of positive cash flow for the first time in the latest quarter. Wolfe Research maintained an Outperform rating for GitLab, noting the potential technical synergies between GitLab's developer pipeline and Datadog's observability tools.
Datadog, on the other hand, has been receiving mixed feedback from analysts. Mizuho Securities, Evercore ISI, and Loop Capital maintained their positive ratings for the company, citing potential for revenue growth and market leadership.
Still, Monness, Crespi, Hardt downgraded Datadog from Neutral to Sell due to valuation concerns. Datadog, valued at $44 billion, has been integrating its Agent with the OpenTelemetry Collector and expanding its security features for cloud applications, reflecting the company's commitment to innovation and growth.
These developments highlight the dynamic nature of the software development industry, with companies seeking to streamline processes and tools for enhanced efficiency and cost-effectiveness. The potential merger and acquisition activity between GitLab and Datadog underscores the high stakes involved in such potential deals.
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