Wolfe Research analysts upgraded Datadog, Inc. (NASDAQ:DDOG) to Outperform from Peer Perform, with a $140 per share price target in a note to clients Tuesday.
The analysts said they upgraded the stock ahead of its DDOG Dash conference on August 2 and F2Q23 earnings on August 8 due to the fact "engineers simply cannot live without their Datadog."
"While growth did indeed slow materially (from 63% in '22 to ~25% consensus for '23) the valuation has actually expanded. In the meantime, our checks suggest optimization headwinds are abating, competition is easing, GTM execution has improved, and Generative AI tailwinds could make DDOG the fastest-growing software company," they wrote.
They added: "We are more constructive on the name for 3 reasons: 1) our checks this quarter were very good, 2) our fears around disruptive competition have eased, and 3) we see meaningful upside to numbers from Generative AI offerings and renewed Cloud consumption tailwinds."
The firm raised its forecast for DDOG revenue growth to 25%/28%/32% in FY23E/24E/25E, above previous estimates in-line with street for CY23, and above in CY24 and CY25, where they see more AI impacts.