Source: Beast Finance Author: Beast Finance
Datadog Stock Price
Datadog (DDOG) shares are currently trading around 50% below their all-time highs and around 50% above their recent lows.
The last time Beast Finance paid attention to Datadog was in April. At that time, we sold Datadog stock because the stock's growth prospects had deteriorated, but because its growth rate is more resilient than expected, Datadog stock has now rebounded 36 %.
The Key Metric for Datadog Stock
Datadog's revenue rose 33% year-over-year in the first quarter of 2023 to $481.7 million, well ahead of consensus estimates of $70 million.
(Datadog's revenue, source: Datadog's first quarter 2023 financial report)
Although the number of Datadog's customers will continue to grow in the first quarter of 2023, considering the severe macro environment, Beast Finance predicts that in the next few quarters, it may not be so easy for Datadog to continue to achieve rapid growth in the number of customers up.
(Datadog's number of customers, source: Datadog's first quarter 2023 financial report)
Although the number of customers may not be able to achieve as strong growth as before, Datadog can still be in a strong position in the industry with its complete product portfolio, because Datadog even in the current The environment is also able to grow revenue by upselling existing customers.
(Datadog's product strategy has been synergized with customers, source: Datadog's 2023 first quarter financial report)
As mentioned above, there are already a large number of customers who use at least 2 of Datadog's products, but there are still a large number of customers who use Datadog with fewer than 4 products. Therefore, the customer churn rate can be reduced by expanding product sales to existing customers, which also explains why Datadog's total retention rate will be as high as 90%, and TTM will be as high as 130%.
Datadog's operating income for the first quarter of 2023 was $86 million, with a margin of 18%. It was flat quarter-over-quarter, but lower than the year-over-year increase of 23% in the previous year. This shows that Datadog has generated positive operating and free cash flow profits in recent years.
(Datadog's financial performance, source: Datadog's first quarter 2023 financial report)
As of the end of the first quarter of 2023, Datadog still has US$2 billion in cash and US$740 million in convertible bonds on its books, plus positive cash flow, which shows that Datadog's current balance sheet is very healthy.
Looking ahead, management expects second-quarter 2023 revenue to grow 24% year-over-year to $502 million, and expects full-year revenue to rise 25% year-over-year to $2.1 billion, slightly above the previous forecast of $2.09 billion. Considering that the current macro environment is still very severe, and many peers have lowered their forecasts, the forecast of Datadog management should be very strong.
(Guidance from Datadog management, source: Datadog Q1 2023 earnings report)
Is Datadog stock a buy, sell, or hold?
Datadog seeks to address the complexities of managing data.
(Datadog's product portfolio, source: Datadog's 2023 first quarter financial report)
Datadog has a broad product portfolio, primarily in its infrastructure and performance monitoring product lines.
(Datadog's product portfolio, source: Datadog's 2023 first quarter financial report)
The company's strong revenue growth rate, strong margins, and exposure to artificial intelligence growth help the stock command a premium valuation. Based on the latest stock price, Datadog's stock price is only about 15 times this year's sales. Considering that the market generally expects Datadog's future growth rate to be between 25% and 30%, Boldbeast Finance believes that this is a very high multiple, based
on With a long-term net profit margin of 30%, a revenue growth rate of 30%, and a PEG ratio of 1.5 times, Beast Finance believes that Datadog's reasonable valuation should be 13.5 times sales, which means that if Datadog can continue to If it maintains a high growth rate over the years, then its stock price will still have room to rise in the future.