Datadog (DDOG) Stock Trades Up, Here Is Why

Anthony Lee /
2023/06/02 11:50 am EDT

What Happened:

Shares of cloud monitoring software company Datadog (NASDAQ:DDOG) jumped 5.33% in the after-market session after MongoDB reported a beat-and-raise quarter where key metrics broadly exceeded expectations and guidance was strong. Consumption-based revenue models in SaaS such as MongoDB, Datadog, Snowflake, and certain of Cloudflare's products have been much debated--will an uneven macro hurt these companies as customers cut headcount and streamline spend or will ongoing increases in demand be reflected much faster than with traditional subscription models? MongoDB's earnings results show that demand is healthy, and while there may be cost containment efforts, they are not hindering the company's results. Additionally, there's a case to be made that demand for AI and the technology load that AI creates is a peripheral benefit to SaaS companies that enable data & analytics, infrastructure monitoring, and that are generally pickaxes for software engineers and developers.

What is the market telling us:

Datadog's shares are very volatile and over the last year have had 50 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. The previous big move was 29 days ago, when the company gained 7.22% on the news that the company reported an impressive 'beat and raise' quarter. First-quarter results exceededed analysts' revenue, operating profit, free cash flow, and earnings per share (EPS) expectations. While next quarter's revenue guidance was roughly in-line, operating income guidance was ahead. The bright spot was full year guidance--the company raised revenue and operating profit guidance from the previous, both of which were above Consensus estimates. Overall, it was an impressive quarter.

Datadog is up 39.6% since the beginning of the year, but at $100.73 per share it is still trading 14.5% below its 52-week high of $117.76 from August 2022. Investors who bought $1,000 worth of Datadog's shares at the IPO in September 2019 would now be looking at an investment worth $2,680.

Is now the time to buy Datadog? Access our full analysis of the earnings results here, it's free.