A Long-term Bet?
Datadog went public in September 2019, nearly a decade after it was founded. Interestingly, the company managed to maintain profitability — often defying analysts’ negative outlook — even when the market entered a rough patch last year after being hit by the coronavirus. The management’s strategy of signing customers for a single service and then cross-selling additional services has been successful so far. Currently, the majority of customers use multiple products and the trend is expected to continue, given the stable demand for cloud monitoring services.
Mixed Sentiment
There was a 56% spike in fourth-quarter revenues to about $178 million, supported by a marked increase in the number of high-value customers. Consequently, adjusted earnings doubled to $0.06 per share from $0.03 per share last year. The numbers also surpassed analysts’ forecast, bringing cheer to the company’s shareholders. Meanwhile, the management’s weak guidance, which missed expectations, was a dampener as far as investor sentiment is concerned. The cautious outlook can be linked to the pressure on margins from costs associated with the integration of newly acquired assets and continuing investments in the business.
Read management/analysts’ comments on Datadog’s Q4 results
Datadog, which competes with the likes of Amazon (NASDAQ: AMZN), Splunk (NASDAQ: SPLK), and CrowdStrike (NASDAQ: CRWD), offers subscription-based services that allow customers to constantly monitor the performance of cloud-based applications and infrastructure. While aggressively expanding the portfolio, the company also acquired several tech firms in recent months, with the latest being application-security management platform Sqreen.
“We launched the general availability of Incident Management, which allows users to declare incidents, investigate the root cause and collaborate without leaving Datadog. And we also delivered more than 60 other new capabilities and features across our products, including new and enhanced integrations such as Snowflake, Oracle Cloud, or vulnerability analysis monitoring Snyk with our brand new Continuous Profiler,” said Datadog’s chief executive officer Olivier Pomel while interacting with analysts recently.
Stock Slips
The post-earnings rally proved to be short-lived in early February, with the shares withdrawing from the peak and slipping into a six-month low. Currently trading down 8% from the levels seen at the beginning of the year, the stock closed the last trading session at $83.34.