Datadog (DDOG): Evaluating Current Valuation and Market Prospects in the Cloud Monitoring Sector

Datadog (DDOG) continues to draw attention from investors, especially as recent performance numbers signal interesting trends for the company. Its year-to-date gains and wider market moves provide context for anyone watching the cloud monitoring sector.

See our latest analysis for Datadog.

Datadog’s share price has gained strong momentum lately, with a recent 17.1% return over the last 90 days setting it apart from many tech peers. While there were some short-term dips this month, the stock’s robust three-year total shareholder return of 114.17% and year-to-date price return of 11.4% point to ongoing confidence in its growth story, even as near-term volatility reminds investors to stay watchful.

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The key question for investors now is whether Datadog’s recent gains leave more room for upside, or if the stock’s forward momentum already reflects all the positive future expectations. Are we looking at a buying opportunity, or has the market already priced in its growth potential?

Most Popular Narrative: 24.5% Undervalued

Compared to Datadog’s last close at $160.01, the most popular narrative assigns a fair value of $211.97. This suggests strong potential for upside. This valuation reflects expectations that future earnings and platform expansion can outpace recent volatility and market skepticism.

Ongoing product innovation (for example, autonomous AI agents, enhanced security modules, expanded log and data observability) is increasing platform breadth and relevance. This is providing cross-selling opportunities and driving higher average revenue per user and net retention rate, which in turn improves recurring revenue predictability and gross margins.

Read the complete narrative.

Curious which assumptions are powering this bullish stance? The narrative’s core rests on a unique mix of rising margins and future profit multiples that defy typical software sector trends. Find out what surprising numbers could justify this aggressive fair value.

Result: Fair Value of $211.97 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, major customers cutting spending or fiercer competition from new platform entrants could quickly challenge Datadog’s optimistic growth outlook.

Find out about the key risks to this Datadog narrative.

Another View: Valuation by Sales Ratio

Taking a look from a price-to-sales perspective, Datadog comes out as expensive. Its ratio stands at 17.5 times sales, much higher than the peer average of 7.2 times and the industry’s 4.9 times. That is well above the fair ratio of 15.5 times that the market might ultimately target. Does this premium signal lasting quality, or possible over-exuberance?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Datadog Narrative

If the current analysis doesn’t match your take or you want to test your own assumptions, you can dive into the data and shape your own view in just a few minutes. Do it your way.

A great starting point for your Datadog research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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