{"id":70843,"date":"2023-10-10T04:36:10","date_gmt":"2023-10-10T08:36:10","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/datadog-faces-revenue-risk-and-its-stock-isnt-cheap-warns-bofa\/"},"modified":"2023-10-10T04:36:13","modified_gmt":"2023-10-10T08:36:13","slug":"datadog-faces-revenue-risk-and-its-stock-isnt-cheap-warns-bofa","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=70843","title":{"rendered":"Datadog faces revenue risk \u2014 and its stock isn\u2019t cheap, warns BofA"},"content":{"rendered":"
\n

Shares of Datadog Inc. were getting hit Monday after BofA Securities came out with a more cautious take on the observability software company, warning of \u201cdownside revenue risks.\u201d <\/p>\n

BofA\u2019s Koji Ikeda worries that his industry conversations haven\u2019t shown significant improvement in demand. \u201cOur take is that while things have not gotten significantly worse, it has\u00a0also\u00a0not gotten significantly better, which leads us to believe that Datadog will continue to take a very\u00a0conservative\u00a0approach to its outlook,\u201d he wrote. <\/p>\n

\n

What\u2019s more, \u201cDatadog is widely perceived to be a premium offering,\u00a0which could drive the end-market to lower cost competitors, native hyperscaler offerings, and\/or open-source alternatives,\u201d all factors that could weigh on revenue, remaining performance obligations and billings performance. <\/p>\n

Ikeda downgraded Datadog\u2019s stock
\n DDOG,
\n -3.92%<\/bg-quote>
\n to neutral from buy Monday, noting that he ran through various scenarios suggesting consensus revenue expectations might be too high. \u201c[I]nitial 2024 guidance falls\u00a0below the current consensus in\u00a0the majority\u00a0of the outcomes,\u201d he wrote. <\/p>\n

Don\u2019t miss:<\/strong> Oracle\u2019s stock has a \u2018huge call option,\u2019 one new bull says<\/p>\n

Datadog shares, down 4.3% in Monday\u2019s session, also aren\u2019t cheap, according to Ikeda. He flags that the stock trades at 13.2 times his estimates for enterprise value to calendar 2024 revenue, constituting a 100% premium to fellow infrastructure software names. Additionally, the stock trades at 62.9 times his estimated enterprise value to calendar 2024 free cash flow, making for a 70% premium.<\/p>\n

Read:<\/strong> Should investors \u2019embrace the suck\u2019 of software stocks? Here\u2019s what history has to say.<\/p>\n

The company\u2019s \u201cpremium offering remains best-of-breed as a differentiated end-to-end observability and cloud security platform with customer logo growth likely keeping [Datadog] as a core holding,\u201d he wrote. \u201cHowever,\u00a0we view\u00a0upside\u00a0as\u00a0likely capped as conservative demand, competitive threats, and\u00a0meaningful\u00a0AI tailwinds likely\u00a0come\u00a0in [the second half of 2024],\u00a0constraining\u00a0the\u00a0growth\u00a0profile.\u201d <\/p>\n

Those AI benefits could come later than he initially believed, he wrote, as he lowered his price objective on the stock to $105 from $123.<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Shares of Datadog Inc. were getting hit Monday after BofA Securities came out with a more cautious take on the observability software company, warning of \u201cdownside revenue risks.\u201d BofA\u2019s Koji Ikeda worries that his industry conversations haven\u2019t shown significant improvement in demand. \u201cOur take is that while things have not gotten significantly worse, it has\u00a0also\u00a0not […]<\/p>\n","protected":false},"author":1,"featured_media":70844,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"video","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-70843","post","type-post","status-publish","format-video","has-post-thumbnail","hentry","category-investing","tag-featured","post_format-post-format-video"],"yoast_head":"\nDatadog faces revenue risk \u2014 and its stock isn\u2019t cheap, warns BofA | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Shares of Datadog Inc. were getting hit Monday 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