Why Datadog Stock Is Sinking Today

Core Insights - Datadog's stock is experiencing a decline, with a 4.9% drop noted during trading, while major indices like the S&P 500 and Nasdaq also fell [1] - Stifel has downgraded Datadog's stock rating from buy to hold and reduced its one-year price target from $165 to $140, indicating a potential downside of approximately 3.5% [2] - Despite a strong revenue growth of 26% year-over-year, reaching $690 million in Q3, Stifel analysts predict a slowdown in momentum and new margin pressures for Datadog [3][4] Financial Performance and Outlook - Datadog is set to release its Q4 earnings on February 13, with sales guidance between $709 million and $713 million, which would represent a 20.5% year-over-year growth compared to $590 million in the same quarter last year [5][6] - The company is also guiding for non-GAAP earnings per diluted share between $0.42 and $0.44, compared to adjusted earnings of $0.44 per share in the previous year [6] Market Position and Valuation - Datadog is expected to benefit from ongoing AI-related demand for its cloud monitoring and security services, but it is trading at a high growth-dependent valuation of approximately 73 times expected annual earnings and 15 times expected sales [7] - Stifel believes Datadog's current price range reflects full valuation, with potential downside risks associated with future quarterly reports [4]