Datadog Stock Up 205% Since March, Thrives in COVID-19 Economy

Datadog Inc Shares Hit Record Highs Following Strong Q1 Results

Datadog Inc (NASDAQ:DDOG) has been on fire since the stock market bottomed in March on COVID-19 fears.

Most people aren’t familiar with Datadog stock because it only went public in September 2019. But that’s about to change.

It’s almost impossible to ignore the kinds of moves that DDOG stock has been making. As of this writing, Datadog stock is up 133.5% since the start of 2020. It has also advanced 131.5% year-over-year and has soared 205% since March 16.

Why the drastic moves? First, the company provides cloud software. And with more and more businesses moving to the cloud and people working from home as a result of COVID-19 and social distancing, businesses like Datadog have been booming.

Eventually though, cloud businesses will need to rely on more than COVID-19 to maintain the blistering pace of their share prices. Datadog can do that. In May, it  announced strong first-quarter results and an impressive outlook for the second quarter and full year.

DDOG Stock Overview

Some tech stocks are difficult to understand, but Datadog stock isn’t one of them. The New York City-based company is a cloud software firm that helps its clients monitor the performance of their servers, networks, databases, and apps.

The company’s cloud-based software as a service (SaaS) helps its clients understand user behavior, track key business metrics, reduce the amount of time it takes to problem-solve, and speeds up the time for applications to go to market.

Datadog continues to attract a growing list of prestigious clients. A few of the thousands of customers that trust Datadog to fetch their data are FedEx Corporation (NYSE:FDX), Peleton Interactive Inc (NASDAQ:PTON), and Twitter Inc (NYSE:TWTR). (Source: “Customers,” Datadog Inc, last accessed June 22, 2020.)

Chart courtesy of StockCharts.com

Datadog entered 2020 enjoying the tailwinds of the January Effect, which was upended in March when the global market tumbled on COVID-19 fears. Soon though, investors realized that some stocks will do better than others under a quarantine and social distancing. Cloud tech companies have been some of the biggest winners in these circumstances.

After trending upward for a couple months, DDOG stock got a big boost when it announced strong first-quarter results and a strong outlook in early May. Since then, Datadog has continued to trend steadily higher, notching up new 52-week highs along the way.

Because of fears of a second wave of COVID-19 and regional flare-ups threatening the global market, Datadog should continue to do well over both the short and long terms.

Q1 Revenue Up 87%, Swings to Profitability

On May 11, DDOG announced that its revenue for the first quarter, ended March 31, jumped 87% year-over-year to $131.2 million. (Source: “Datadog Announces First Quarter Results,” Datadog Inc, May 11, 2020.)

The company also reported first-quarter net income of $6.5 million, or $0.02 per share. In the first quarter of 2019, Datadog reported a net loss of $9.5 million, or a loss of $0.12 per share.

The company ended the quarter with cash, cash equivalents, restricted cash, and marketable securities of $798.5 million.

Datadog ended the first quarter with 960 customers that had annual recurring revenue of $100,000 or higher. That’s an 89% increase from the first quarter of 2019.

“We are very pleased with our first quarter performance, in which we delivered 87% year-over-year revenue growth,” said Olivier Pomel, co-founder and CEO. (Source: Ibid.)

“This crisis has demonstrated the need to be digital-first and agile, has underscored the importance of observability into cloud environments, and reaffirmed the long-term opportunity for Datadog.”

Outlook

For the second quarter, Datadog Inc expects to report revenue between $134.0 and $136 million, adjusted operating income (or loss) between -$1.0 million and $1.0 million, and adjusted net income per share between $0.00 and $0.01.

For fiscal 2020, Datadog expects to report:

• Revenue between $555.0 and $565.0 million, representing year-over-year growth of 54.3% at the midpoint
• Adjusted operating income between zero and $10.0 million, compared to an adjusted operating loss of $5.4 million in 2019
• Adjusted net income per share between $0.02 and $0.06, versus an adjusted net loss of $0.12 per share in 2019

(Sources: Ibid and “Datadog Announces Fourth Quarter and Full Year 2019 Results,” Datadog Inc, February 13, 2020,)

Analyst Take

Datadog stock is a great, overlooked cloud tech stock.

The company has been reporting strong financial results, swinging to profitability. It has been growing its customer base and it’s launching new products. Datadog Inc also provided a strong outlook for the second quarter and fiscal 2020.

All this makes DDOG stock one of the top tech stocks to watch in the post-COVID-19 economy.