The market has surged to start November and the trend continued in a big way Wednesday, with Wall Street seemingly pleased with the prospect of divided government. Datadog DDOG shares soared over 8% through early afternoon trading to outpace the Nasdaq’s 4% climb.
The monitoring and security platform for cloud applications has also crushed its industry in 2020 and DDOG is poised to post solid growth when it reports its Q3 fiscal 2020 financial results on Tuesday, November 10.
The Simple Pitch
Datadog went public in September 2019 and its stock price has climbed roughly 170% since then, which blows away the Computer Software Services Market’s 34% average. This nice run includes a 110% climb in the past six months as the monitoring and security platform showcased strong growth within the broader cloud space that has helped the likes of Salesforce CRM, Zoom Video ZM, and countless others surge during the remote work world.
Datadog is a SaaS firm that “integrates and automates infrastructure monitoring, application performance monitoring and log management to provide unified, real-time observability of our customers’ entire technology stack.” DDOG topped our Q2 earnings estimate in early August. The firm’s second quarter sales jumped 68% and its large customers ($100k+ in annual recurring revenue) surged from 594 in the year-ago period to over 1,000.
DDOG launched its Security Monitoring offering earlier this year and announced this summer that it acquired Undefined Labs, which is “a testing and observability company for developer workflows.” DDOG then announced a strategic partnership with Microsoft MSFT at the end of September.
Datadog will become “available in the Azure console as a first class service. This means that Azure customers will be able to implement Datadog as a monitoring solution for their cloud workloads through new streamlined workflows…” The deal could help Datadog gain solid exposure in a cloud space dominated by Microsoft and Amazon AMZN. Plus, the company earlier in September said that it “achieved the AWS (the Amazon Web Services) Outposts Ready designation.”
Looking ahead, Zacks estimates call for DDOG’s Q3 revenue to climb 50.5% to reach $144.2 million. Meanwhile, its adjusted quarterly earnings are projected to pop from breakeven ($0.0) in the year-ago period to +$0.01 a share.
On top of that, Datadog’s full-year sales are projected to surge over 57% in 2020 and another 35% higher in FY21. Investors will also be pleased to see that DDOG is expected to swing from an adjusted loss of -$0.01 per share last year all the way to +$0.13 in fiscal 2020.
Datadog’s earnings outlook is up big compared to where it sat prior to its Q2 report. The firm’s consensus bottom-line estimates have, however, remained unchanged recently to help it land a Zacks Rank #3 (Hold) at the moment. But it’s worth noting that it has crushed our earnings estimates by an average of 360% over the trailing four periods.
DDOG stock might be worth considering as a longer-term play for its exposure to both cloud computing and big data. And Datadog currently rests about 18% off its early October highs—including Wednesday’s big jump—at around $97 per share. This could give it plenty of room to climb if it’s able to impress Wall Street next week.
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