Oppenheimer analysts recommend Datadog shares
2023.01.04 14:24
Oppenheimer analysts recommend Datadog shares
Budrigannews.com – Datadog, Inc. (NASDAQ:) was highlighted by Oppenheimer analysts. in a research note on Wednesday as the company’s top pick for 2023, and Bernstein analysts issued a memo outlining their concerns regarding the company’s potential FY23 guide.
Given the mission-critical nature of its observability solutions, Oppenheimer stated that their position on the stock is based on the belief that Datadog is relatively resilient to macro pressures and continues to benefit from the sale of additional product modules, “which should further expand with a move to application/cloud security.”
In addition, they stated that the business would be able to maintain operating margins in the “high teens” while growing revenue by more than 30%. Additionally, they provided a conservative 4Q22 guidance that carries less immediate downside risk. According to Kidron, the company regards Datadog as a “core long-term holding.”
In the meantime, Bernstein questioned in its note whether Datadog faces a capitulation risk in 2023.
“Could revenue growth in FY23 present a risk for re-rating?” “We looked at a recession scenario in our October note and found that it may slow Datadog’s growth to 27-33% YoY at the bottom,” wrote the analysts, who have given the stock an Outperform rating and a $155 price target.
“It appears that our recession growth model matches market expectations. Conversations with many driving financial backers recommended general understanding – they report a comparative downturn level development assumption in their own models.
And the sell-side anticipates 34% in the first quarter, 32% in the second and third quarters, and 38% in the fourth,” they added. Does this imply that Datadog will be sufficiently de-risked in FY23? Not right now! We did discover one potential short-term incremental risk: MARGINS.
At worst, these very same investors anticipate flat margins (we model Q4 15.7% OpM). In addition, the sell-side appears to have a similar expectation, with Non-Gaap OpM at 17.3% in Q1 FY23 and consistently rising to 17.9% in Q4.
“It may be prudent to wait for a better entry point to what we continue to believe is an attractive investment on a 1+ year time horizon – even in a recession case, given an expected mid-year bottom and rapid pace of rebound,” the analysts concluded. “If you believe a recession case is likely,” they added.
In the current session on Wednesday, Datadog shares have lost nearly 3%.
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