Will Datadog’s stock surge following BofA’s upgrade?

on May 30, 2024
  • BofA upgrades the stock to a 'Buy' from 'Neutral'.
  • Datadog expands partnerships and product offerings.
  • Technical analysis signals resistance at $138, potential support at $80.

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Bank of America recently upgraded Datadog Inc. (NASDAQ:DDOG) from ‘Neutral’ to ‘Buy’, citing it as the “next high-quality large-cap stock.” This upgrade has caught the attention of investors. In a note released on Thursday, BofA’s analysts, led by Koji Ikeda, highlighted Datadog’s robust platform with 22 products and its attractive value proposition.

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Datadog’s dynamic partnerships and product integrations

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In addition to BofA’s upgrade, Datadog has been making headlines with new partnerships and product integrations. Last week, the company announced a collaboration with JFrog, aiming to enhance developers’ efficiency and visibility. This partnership is expected to streamline operations for users and potentially drive further adoption of Datadog’s services.

Datadog’s recent earnings report showed mixed reactions from the market. Despite reporting better-than-expected financial results, the company’s cautious guidance led to a drop in its stock price. However, analysts like those from Robert Baird see this as an opportunity, upgrading the stock to ‘Outperform’ based on its strong usage growth.

Beyond the upgrade: Exploring Datadog’s ecosystem of growth

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The company’s business fundamentals remain strong, driven by a high level of user engagement and an increasing adoption of its multi-product platform. Datadog’s ability to continuously innovate and integrate new features has positioned it well in the competitive cloud infrastructure market.

From a valuation perspective, Datadog may not be cheap, but according to analysts its strong growth prospects and leading position in the market justify its premium. The company’s consistent performance, coupled with its focus on expanding its product offerings, supports the positive outlook from analysts.

Other analysts have also expressed optimism about Datadog’s future. The recent surge in new spending activity from existing customers and strong year-over-year growth indicates that the company is overcoming previous optimization challenges.

With the upcoming DASH customer conference, Datadog is expected to unveil more details about its plans for generative AI. This event could serve as another catalyst for the stock, potentially driving further interest and investment.

Datadog’s price landscape: Analyzing the terrain from resistance to support

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Datadog’s stock witnessed a significant surge from March 2020 to late 2022, delivering over a six-fold return to investors. Subsequently, it entered a gradual decline lasting more than a year, plummeting to around $60. The stock began another upward trend in March of the previous year but seems to have encountered resistance around the $138 mark.

DDOG chart by TradingView
Presently, the stock exhibits weakness on daily charts. Without any significant announcements during the upcoming DASH conference, there’s potential for further decline. Therefore, investors bullish on the stock should await a breakthrough above $138 before considering long positions.

Traders anticipating the stock’s weakness may consider initiating short positions around $122, setting a stop loss at $132.4. If downward momentum persists, the stock could revisit its recent low near $80, providing an opportunity to book profits.

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