Datadog stumbles as Bank of America downgrades, citing recent checks
Just_Super
Datadog (NASDAQ:DDOG) shares fell nearly 3.5% in pre-market trading on Monday as Bank of America downgraded the cloud software company, citing recent checks which indicate "downside revenue risk."
Analyst Koji Ikeda lowered his rating on Datadog (DDOG) shares to neutral from buy and cut his price target to $105 from $123, noting that recent checks see "conservative demand," along with increased competition.
Additionally, any tailwinds from artificial intelligence are not likely to come until at least the second-half of next year, "constraining" the company's growth.
"The demand environment has not meaningfully improved based on recent checks with developers, SREs, partners, and SIs," Ikeda wrote in a note to clients. "Furthermore, Datadog is widely perceived to be a premium offering, which could drive the end-market to lower cost competitors, native hyperscaler offerings, and/or open-source alternatives, which could constrain revenue, RPO and billings growth; and NRR expansion." 
As such, Ikeda lowered his revenue estimates for 2024 and 2025 to $2.4B and $2.9B, down from previous estimates of $2.6B and $3.3B, respectively.
Iked also noted that Datadog (DDOG) trades at roughly 13.2 times enterprise value to estimated revenue and 62.9 times enterprise value to estimated free cash flow, which are 100% and 70% premiums to their peers such as Splunk (SPLK), Dynatrace (DT) and others.
Analysts are largely bullish on Datadog (DDOG). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates DDOG a HOLD.

More on Datadog

Datadog Is A Winning Bet As Rule Of 40 Stocks Are Rarer In This Market
Datadog: Still A Growth Story For The Long Term
Datadog: Alarming Mismatch Between Consensus Estimates, Management Guidance
Zscaler, Datadog enter top picks at Piper Sandler as it shuffles picks
Datadog rises as Piper Sandler upgrades, citing stability,' boost from AI