You’re selling Datadog shares at the worst possible time

Wall Street is not happy with Datadogof (NASDAQ: DDOG) last trimestre. The cloud-based provider of next-generation site analysis, uptime monitoring and other essential business tools opened on Wednesday after releasing third quarter results. Analysts are not happy with the performance:

• Barclays is reducing its price target from $ 136 to $ 115.
• Mizuho joins Barclays at $ 115. Its previous price target was $ 125.
• Sterling Auty at JP Morgan downgrades the stock to neutral.

Growth is slowing at Datadog, but the company still managed a beat-and-rise quarter. It is always a fast growing company that builds its ecosystem with happy customers throughout the process. Datadog is better than the market response to its latest financial data. Let’s see why Datadog doesn’t deserve to be in the niche.

Growth matters

Revenue rose 61% to $ 154.7 million, ahead of the 50% revenue growth the pros expected. Datadog’s adjusted earnings of $ 0.05 per share was a five-fold improvement over Wall Street’s target. The shrinking tech darling is bolstering its full-year outlook, and its forecast initiated for the current quarter is also ahead of analyst consensus estimates.

Datadog stock was already 22% below the all-time high it hit last month ahead of Wednesday’s reaction to earnings news. It’s fair to say that Datadog is not cheap stock, commanding a multiple of earnings that is roughly 50 times its enterprise value. Billing slowed to an all-time high of 39% in this week’s report. There is still many love here.

Its dollar-based net retention rate has reached 130% or more for 13 consecutive quarters. Its number of customers grew to 13,100 customers, adding approximately 1,000 new customers during the quarter. More importantly, its bigger customers are even more fanatic of the platform. Accounts with annual revenue rates of at least $ 100,000 or more – a group of big players accounting for 75% of its business – have gone from 727 to 1,107 in the past year.

It announced eight new products over the summer at its annual user conference, and its most active customers are not afraid to look more and more into Datadog. Over the past year, we’ve seen the 7% of its customers using four or more of its products grow to 20% of its customer base.

Even with stocks declining in recent weeks, it’s still a winner since its $ 27 IPO just 14 months ago. Investing in IPOs will always be risky, but you won’t see early believers complaining about an investment that has more than tripled since it hit the market.