New Relic rises as DA Davidson starts coverage with buy rating
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New Relic (NYSE:NEWR) shares rose nearly 1% in early trading on Thursday as investment firm D.A. Davidson started coverage on the cloud-based software company with a buy rating.
Analyst Gil Luria, who also slapped a per-share price target of $100, noted the company is a leader in the observability space and could close the growth gap with its competitors, notably Datadog (DDOG), based on pricing and faster adoption of OpenTelemetry.
"With a free entry-level tier and straightforward consumption model, we believe New Relic has a strong competitive message against Datadog," Luria wrote in an investor note. "Our checks indicate Datadog's complex pricing model that generates 25% of revenue from overages, may have worked well when customers prioritized speed over price, but we are no longer in that environment."
Looking further ahead, Luria said OpenTelemetry's transformation of observability and DevOps could be transformational for New Relic (NEWR) and help it better position itself against Datadog (DDOG).
"Our proprietary analysis indicates New Relic is better positioned for this shift based on its higher investment into OpenTelemetry, as well as its pricing model," Luria added. "The simple pricing model means customers will pay less for connecting OpenTelemetry streams into New Relic." 
Luria also added that New Relic's (NEWR) recent partnership with Microsoft (MSFT) Azure could leverage the growth of generative artificial intelligence and thus benefit the company, "as Azure developers who are looking for a monitoring solution specifically for their generative AI products may gravitate towards New Relic."
Earlier this month, New Relic (NEWR) said it expects to incur aggregate restructuring charges totaling ~$40M-45M, consisting primarily of real estate lease termination and other associated costs.