Shares of software firm Datadog are on the rise following a positive outlook for customer spending, highlighted by analysts at Stifel. The Stifel team, led by Brad Reback, upgraded Datadog’s stock from Hold to Buy and raised their price target from $90 to $140.
In Thursday morning trading, shares climbed 1.6% to reach $116.08. Year-to-date, the stock has already experienced an impressive gain of 58%.
Stifel’s optimism stems from a recent customer survey conducted by Datadog. The survey revealed that only 38% of participants plan to reduce their spending on the company’s platform, a significant improvement compared to the 50% recorded in the previous two surveys conducted six months and a year ago.
“While our survey shows an improvement in the number of customers optimizing their spending, it is worth noting that some respondents still left room for future optimizations,” wrote the analysts.
This sentiment aligns with management’s remarks during a recent conference call to discuss the third-quarter report. CEO Olivier Pomel stated that while customers are expected to continue managing costs, the intensity and extent of these efforts are now less pronounced compared to previous quarters.
Looking ahead, Stifel predicts a positive trajectory for Datadog. Customers consistently emphasize the favorable price-to-value ratio and anticipate increasing their spending by approximately 12% next year, compared to single-digit growth in 2023. The analysts anticipate that, after a volatile year, the company will report a solid revenue growth of around 25% in 2024.
Overall, the bright outlook for customer spending and growth prospects have buoyed Datadog’s stock, reflecting investor confidence in the company’s future success.