Group 1 - Louis Stevens is a former U.S. Army engineer officer with an MBA and a BA in political science, recognized as a leading analyst in the investing community, ranking in the top 0.1% according to TipRanks [1] - Louis created L.A. Stevens Research, which includes the LAS Index, a basket of stocks selected through a proprietary investment method that has consistently outperformed market indices since its inception [2] - The research and investment services provided by Louis cater to a diverse audience, including beginners, busy professionals, and seasoned fund managers [2]

Core Viewpoint - Datadog's stock has underperformed compared to the broader market and its industry, raising concerns for investors about its future performance and valuation [1][20]. Market Competition and Pricing Pressure - Datadog faces significant pricing pressure from competitors such as IBM, Microsoft, and Broadcom in on-premise infrastructure monitoring, as well as from cloud providers like Amazon, Google, and Microsoft in cloud monitoring [4] - Customers are increasingly cost-conscious, leading to contract renewals with discounts, which negatively impacts revenue growth. Some large enterprises are also considering in-house observability solutions, posing a threat to Datadog's long-term revenue [5]. Cost Escalations Might Hurt the Bottom Line - Datadog has experienced substantial cost escalations in R&D, sales and marketing, and general and administrative expenses, which increased by 29.4%, 31.3%, and 29.6% year-over-year, respectively, in Q4 2024. This trend is expected to continue into 2025, potentially hurting profitability [6]. Valuation Concerns - Datadog's stock is considered overvalued, trading at a forward 12-month P/S ratio of approximately 11.35, indicating high growth expectations from investors. The Value Score of F suggests a stretched valuation [7]. Product Innovation Drives Market Position - Despite challenges, Datadog is enhancing its market position through product innovation, having introduced over 400 new features in the past year, including LLM Observability and BizAI for incident management [12][16]. - A partnership with Chainguard aims to improve container security and observability, further strengthening its security offerings [13]. AI and Cloud Growth Potential - Datadog is well-positioned to benefit from the rapid adoption of AI and cloud technologies, with AI-native customers contributing 6% of ARR in Q4 2024, doubling from the previous year [14]. - The launch of new products tailored for AI integration enhances Datadog's appeal in the growing market for AI-driven solutions [16]. Financial Performance and Market Outlook - Datadog's guidance for Q1 2025 projects revenues between $737 million and $741 million, indicating a year-over-year growth of 20-21%. The full-year 2025 outlook suggests revenues between $3.175 billion and $3.195 billion, with non-GAAP EPS expected in the range of $1.65-$1.70 [17]. - The Zacks Consensus Estimate for 2025 revenues is $3.19 billion, reflecting an 18.85% year-over-year improvement, while earnings per share are expected to decrease by 7.14% [18]. Conclusion - Current valuations suggest that investors may benefit from waiting for a better entry point, as Datadog's strong product portfolio and market position are countered by challenges from competition and cost escalations [20]. - Datadog is viewed as a compelling long-term investment candidate, but factors such as cost-conscious spending and the risk of enterprises shifting to in-house solutions could limit growth [21].

Core Viewpoint - Datadog's stock performance has shown a slight increase recently, but it has underperformed compared to the broader market over the past month, with upcoming earnings expected to reflect a decline in EPS but an increase in revenue [1][2]. Company Performance - Datadog closed at $110.58, with a daily increase of 0.37%, outperforming the S&P 500's gain of 0.16% [1]. - Over the past month, Datadog's shares have decreased by 6.25%, compared to a 5.94% loss in the Computer and Technology sector and a 3.59% loss in the S&P 500 [1]. - The upcoming earnings report is anticipated to show an EPS of $0.42, a decline of 4.55% year-over-year, while revenue is expected to reach $739.51 million, reflecting a 20.98% increase [2]. Earnings Estimates - For the full year, earnings are projected at $1.69 per share, representing a decrease of 7.14% from the previous year, while revenue is expected to be $3.19 billion, indicating an increase of 18.85% [3]. - Recent changes in analyst estimates suggest a positive outlook for Datadog's business operations and profitability [4]. Valuation Metrics - Datadog's current Forward P/E ratio is 65.32, significantly higher than the industry average of 28.29 [7]. - The company has a PEG ratio of 7.79, compared to the Internet - Software industry's average PEG ratio of 2.07, indicating a premium valuation relative to expected earnings growth [7]. Industry Context - The Internet - Software industry, part of the Computer and Technology sector, holds a Zacks Industry Rank of 128, placing it in the top 50% of over 250 industries [8]. - Historically, industries in the top 50% outperform those in the bottom half by a factor of 2 to 1 [8].

Core Insights - Chainguard and Datadog have announced a partnership to enhance software supply chain security by integrating container observability with proactive risk mitigation strategies [1][4] - The collaboration aims to provide real-time insights into container risks, enabling engineering and security teams to eliminate vulnerabilities and improve software development velocity [1][5] Group 1: Partnership Overview - The integration combines Chainguard's secure container solutions with Datadog's monitoring capabilities, allowing customers to identify and remediate common vulnerabilities and exploits (CVEs) [1][4] - A new Chainguard dashboard within Datadog will provide a holistic view of container infrastructure and associated CVE risks, facilitating better decision-making for security and engineering teams [3][4] Group 2: Industry Challenges - The World Economic Forum's report indicates that 54% of large organizations view supply chain challenges as the primary barrier to achieving cyber resilience [2] - There is a lack of visibility and accountability between engineering and security teams, leading to increased exposure to supply chain attacks and slower innovation [2] Group 3: Customer Benefits - Joint customers of Chainguard and Datadog will experience reduced risk across their application surface area, transitioning from reactive alerts to proactive risk reduction [5] - The integration allows security teams to prioritize CVE remediation in high-risk containers, enabling engineering teams to focus on shipping secure software more efficiently [5][6]

Core Viewpoint - The Nasdaq Composite index has experienced significant fluctuations, with a 28% increase in 2024 driven by AI stocks, but is currently down 12% from its December peak, indicating a correction phase that may present buying opportunities for investors [1][2]. Company Overview - Datadog has developed a cloud platform for monitoring digital infrastructure and is expanding into the AI sector, with its stock down 45% from its all-time high during the tech boom in 2021 [2][3]. - The company has a diverse customer base, including major players like Sony, which utilizes Datadog's platform to manage its global operations effectively [4]. AI Expansion - Datadog launched an observability tool for large language models (LLMs) to assist developers in troubleshooting and managing costs, which is becoming increasingly vital as LLMs grow in complexity [6][7]. - As of the end of 2024, Datadog had 30,000 customers, with 3,500 using at least one AI product, marking a 75% increase from the beginning of the year [8]. Financial Performance - Datadog reported a record total revenue of $2.68 billion in 2024, a 26% increase year-over-year, surpassing its forecast [9]. - AI-related revenue accounted for 6% of total revenue in Q4 2024, doubling from 3% in Q4 2023, indicating strong growth potential in this segment [10]. - The company managed to grow operating expenses by only 20%, leading to a 278% increase in GAAP net income to $183.7 million for the year [11]. Valuation and Analyst Sentiment - Datadog's stock trades at a price-to-sales (P/S) ratio of 13.9, which is a 51% discount to its long-term average of 28.7, suggesting potential for upside [13][14]. - Analysts are overwhelmingly bullish, with 30 out of 47 assigning the highest buy rating, and an average price target of $161.74, indicating a potential upside of 54% [15]. Market Trends - The increasing adoption of AI across organizations suggests a growing demand for Datadog's observability tools, which could lead to significant revenue contributions from its AI business in the future [16].

Group 1 - Datadog Inc. (DDOG) is a significant player in the IT infrastructure management space, valued at approximately $30 billion [1] - The company offers a comprehensive observability and monitoring platform that helps firms manage, optimize, and secure their IT infrastructure [1]

Market Overview - The Nasdaq Composite entered market correction territory on March 6, closing more than 10% below its recent bull-market high and currently trading 12% below the record high reached in December [1][2] Economic Impact - Uncertainty surrounding the economic impact of U.S. trade policy, including tariffs imposed by the Trump administration, has contributed to the market drawdown [2] Company Analysis: The Trade Desk - The Trade Desk stock has declined 60% from its record high in early December, with a median target price on Wall Street of $112 per share, implying 100% upside from its current price of $56 [4] - The Trade Desk is the largest independent demand-side platform (DSP), which eliminates conflicts of interest seen in competitors [6] - The company reported mixed fourth-quarter results, with revenue increasing 22% to $741 million but missing management's guidance of $756 million [7] - Non-GAAP net income rose 44% to $0.59 per diluted share, exceeding analyst expectations [7] - Wall Street expects The Trade Desk's earnings to grow at 14% annually through 2026, making its current valuation of 33 times earnings appear reasonable [9] - The company is expected to continue beating Wall Street forecasts, presenting a buying opportunity for investors with a three to five-year horizon [10] Company Analysis: Datadog - Datadog shares have fallen 39% from their record high in December, with a median target price of $160 per share, implying 55% upside from the current price of $103 [11] - Datadog provides observability software and has been recognized as a leader in digital experience monitoring and AI for IT operations [12] - The company reported strong fourth-quarter results, with revenue rising 25% to $738 million and non-GAAP earnings increasing 11% to $0.49 per diluted share [13] - Datadog's revenue retention approached 120%, indicating strong adoption of its products by existing customers [13] - Despite disappointing guidance with expected revenue growth of 19% in 2025, the company is positioned to benefit from trends in cloud computing and AI [14] - Shares currently trade at 14 times sales, below the two-year average of 18 times sales, making it an attractive option for long-term investors [15]

Core Viewpoint - Datadog has experienced a significant decline in stock performance, with a return of -27.4% over the past month, compared to the S&P 500's -9.6% and the Zacks Internet - Software industry's -18.8% [2] Earnings Estimate Revisions - The current quarter's earnings estimate for Datadog is $0.42 per share, reflecting a decrease of -4.6% year-over-year, with a notable change of -23.4% in the consensus estimate over the last 30 days [5] - For the current fiscal year, the consensus earnings estimate is $1.69, indicating a decline of -7.1% from the previous year, with a significant change of -44.8% in the estimate over the last month [5] - The next fiscal year's consensus earnings estimate is $2.08, showing an increase of +23.4% year-over-year, although it has decreased by -12.8% recently [6] Revenue Growth - Datadog's consensus sales estimate for the current quarter is $739.51 million, representing a year-over-year growth of +21% [9] - The sales estimates for the current and next fiscal years are $3.19 billion and $3.79 billion, indicating growth rates of +18.9% and +18.8%, respectively [9] Last Reported Results and Surprise History - In the last reported quarter, Datadog achieved revenues of $737.73 million, a year-over-year increase of +25.1%, with an EPS of $0.49 compared to $0.44 a year ago [10] - The reported revenues exceeded the Zacks Consensus Estimate of $711.65 million by +3.67%, and the EPS surprise was +13.95% [11] - Datadog has consistently beaten consensus EPS and revenue estimates in the last four quarters [11] Valuation - Datadog is currently graded F in the Zacks Value Style Score, indicating it is trading at a premium compared to its peers [15] - Valuation multiples such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF) are essential for assessing whether the stock is overvalued, fairly valued, or undervalued [13][14] Bottom Line - The current Zacks Rank of 3 suggests that Datadog may perform in line with the broader market in the near term, despite the recent market buzz [16]

Group 1 - Datadog (NASDAQ: DDOG) has experienced a significant decline since its recent highs in December, indicating potential volatility in the software sector [1] - The management of Datadog provided conservative guidance, reflecting cautious expectations for future performance [1] - The investment strategy discussed emphasizes finding undervalued companies with strong balance sheets and management teams in sectors with long growth potential [1] Group 2 - The leader of the investing group Best Of Breed Growth Stocks focuses on stocks with a high probability of delivering substantial alpha compared to the S&P 500 [1] - The investment approach combines growth-oriented principles with strict valuation criteria to enhance the margin of safety [1] - Features of the investment group include access to high-conviction stock picks, comprehensive research reports, real-time trade alerts, and macro market analysis [1]

Group 1: Market Overview - Software stocks are experiencing increased volatility, with companies like Adobe, Datadog, and Dynatrace facing challenges due to disappointing earnings guidance and market pressures [1] Group 2: Adobe Inc - Adobe's stock has declined by 12.3% to $384.52 after providing weak fiscal second-quarter guidance, projecting earnings of $4.98 on revenue of $5.8 billion, which has led to a 13% drop in 2025 and a 32.6% decrease over the past 12 months [2] Group 3: Datadog Inc - Datadog's stock has fallen 8.2% since its fourth-quarter earnings report in early February, reporting $737.73 million in revenue but a net income drop to $45.59 million; the stock is down 29.3% year-to-date due to broader market volatility and geopolitical tensions [3] Group 4: Dynatrace Inc - Dynatrace's stock is down 11.2% year-to-date, having lost over 21% in the last month, with shares retreating from a three-year high of $63; current trading is at $47.77 after a 3% drop today [4]