Datadog dips on BTIG downgrade over weakening software checks
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Datadog (NASDAQ:DDOG) shares fell nearly 3% in premarket trading on Friday after investment firm BTIG downgraded the cloud software company, noting "weakening" checks.
Analyst Gray Powell lowered his rating on Datadog (DDOG) shares to neutral from buy, stating that customers optimizing cloud expenses with monitoring tools are likely to weigh on the company's revenue growth going forward.
According to Powell, infrastructure monitors, which makes up almost 50% of Datadog's (DDOG) revenue, was seen as "one of the most at risk components" among customers that are budgeting for ways to optimize their cloud systems and slow down on migrating to new technologies.
"In addition, we heard some concerns about [Datadog's] customer base, which skews more towards small and medium sized organizations, being at risk in the current environment," Powell wrote in a note to clients. 
Powell also said that it will be harder for Datadog (DDOG) to win new customers this year and gain traction in large enterprise companies. 
As such, Powell lowered his 2023 and 2024 revenue estimates. He now forecasts revenue this year to be $2.092B, down from a previous view of $2.116B, and next year's sales to total $2.74B, down from a previous estimate of $2.842B.
Despite the downgrade, Powell noted that Datadog's (DDOG) new products have been well received by the marketplace, including its cloud security posture management tools and cloud workload security offerings.
Late last month, J.P. Morgan listed Datadog (DDOG) among its top software picks for 2023. 
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.