Datadog stock price has suffered a big reversal in the past few months, moving from the key level at $200 in November to the current $130. It has dropped to the lowest level since September. So, what’s next for the DDOG stock after this crash?
Wall Street analysts are bullish on the Datadog stock
Datadog stock price has crashed in the past few months as Wall Street analysts have pared back their estimates. Truist lowered its target from $195 to $140, while Piper Sandler, RBC, and Jefferies slashed their targets to $195, $175, and $180, respectively.
Other companies that lowered their estimates are from Wolfe Research and Cannacord Genuity. As a result, the consensus target for the stock is $203, up by 56% from the current level. A month ago, the consensus was $207.
A major concern among analysts is that the company’s growth will decelerate in the coming years. The average estimate among analysts is that its revenue will be $916 million, up by 24% from the fourth quarter of 2024.
If this happens, its annual revenue will be $3.39 billion, up by 26% YoY. Also, analysts see the revenue growth slowing to 21% to $4.1 billion.
DDOG valuation concerns
Analysts are also concerned about its hefty valuation. Data compiled by Seeking Alpha shows that the company has a forward price-to-earnings (P/E) ratio of 70, much higher than the sector median of 25.
Datadog’s forward PEG ratio has moved to 6.07, also higher than the sector median of 1.71. That is a sign that the stock is much high even when factoring in its strong growth metrics.
The company has a forward EV to EBITDA ratio stands at 56, also much higher than the sector median of 15. Its EV/EBIT ratio has jumped to 61, also much higher than the sector median of 21.
Datadog stock is also highly volatile in terms of the Rule of 40 metric, which looks at a company’s growth and profitability. The company has a net profit margin 3.32% and a forward revenue growth of 24%, giving it a multiple of 27%.
One reason why Datadog attracts a higher valuation figure is its market share in the digital experience monitoring, where it leads companies like Dynatrace, New Relic, and Catchpoint.
DDOG stock price technical analysis
The daily timeframe chart shows that the DDOG stock price has come under pressure in the past few months, moving from a high of $201 in November to the current $130.
It has moved below 50% Fibonacci Retracement level at $141, confirming the bearish trajectory. Also, the stock has dropped below the Supertrend indicator since November last year, a sign that bears remain in control for now.
The stock is also about to form the highly bearish death cross pattern, which happens when the 50-day and 200-day Exponential Moving Averages (EMA) cross each other. Such a move would lead to more downside over time.
The Average Directional Index (ADX) has also risen to over 30, a sign that the downtrend is strengthening. Therefore, the most likely scenario is where the stock continues falling, potentially to the next key support level at $107, the 78.6% retracement level.
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