Cross selling momentum puts Datadog’s customer relationships in focus

Recent commentary on Datadog (DDOG) highlights more enterprise clients adopting a wider range of its observability and security products. This broader usage signals deeper customer relationships and a more diversified revenue base.

Datadog’s share price has pulled back around 10% over the past month and about 4% over the past quarter. However, the year-to-date share price return of 77.15% and 1-year total shareholder return of 73.38% indicate that momentum remains firmly positive.

Compare Datadog’s cross selling story with other software and infrastructure companies by scanning the hand picked 56 AI infrastructure stocks.

Datadog now trades about 20% below the average analyst price target and around 25% below one intrinsic value estimate, even after a strong year for the stock. Is that a bargain or justified caution?

Most Popular Narrative: 5% Overvalued

Datadog closed at $236.98 compared with a most popular narrative fair value of $225.76, so the story currently prices in a premium to that model.

Analysts are assuming Datadog's revenue will grow by 22.8% annually over the next 3 years.

Analysts assume that profit margins will increase from 3.7% today to 8.7% in 3 years time.

Curious what kind of revenue curve and margin profile could support that fair value gap. The narrative leans on compound growth, rising profitability and a rich future earnings multiple. Want to see exactly how those moving pieces fit together in the model.

Result: Fair Value of $225.76 (OVERVALUED)

However, Datadog’s story could change quickly if AI focused customers trim usage or if competitors and cloud providers pressure pricing and future margin assumptions.

Another View on Datadog’s Valuation

The first narrative implies Datadog is about 5% overvalued at $236.98 versus a fair value of $225.76. Our DCF model points in a different direction. It suggests fair value of about $318 per share, which frames the current price as trading at a sizeable discount. Which set of assumptions feels more realistic to you?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Datadog for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 44 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With sentiment split between Datadog’s upside potential and the risks flagged in recent analysis, now is the moment to review the numbers yourself and decide how compelling the story really looks. To weigh the trade off between concerns and opportunities in one place, start with the 4 key rewards and 1 important warning sign.

Looking for more investment ideas beyond Datadog?

If Datadog has sparked fresh thinking about your portfolio, it is worth widening the search and seeing what other opportunities fit your risk and income goals.

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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.