Datadog upgraded to conviction buy at Goldman Sachs, sees 50% upside
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Datadog (NASDAQ:DDOG) shares rose in premarket trading on Tuesday as Goldman Sachs upgraded the stock and added it to the firm's Conviction Buy List, citing several reasons, including strong growth.
Analyst Kash Rangan raised the firm's rating to conviction buy from buy and put a $250 price target on shares, implying some 56% upside, noting that the company is "well positioned" for success outside of its core products, notably in security, which could boost the company's total addressable market by $20 billion.
In addition, Rangan cited the company's revenue model "has room to grow," as Datadog only accounts for 10% of its largest clients' cloud spend.
"With only 11% of customers spending $100K in ARR and ~53% penetration within the Fortune 500, we see multiple vectors for growth within its existing customer base, new logos and new platform capabilities," Rangan wrote in the note to clients.
Datadog shares were up slightly more than 1% to $161 in premarket trading on Tuesday.
In addition, Rangan noted that Datadog's product suite is cloud agnostic and is well integrated into a platform on a common architecture.
"These drivers allow Datadog's platform to achieve near-viral adoption and the power to handle the toughest of workloads," Rangan added. "The company's consumption business model and best in class customer acquisition economics also reaffirm our thesis that Datadog can drive outsized growth vs peers as it executes against a $50 [billion]+ [total addressable market]."
Earlier this month, hedge fund Melvin Capital released its 13-F that showed it had boosted its stake in Datadog to 3.27 million shares.