- Needham analyst Mike Cikos spoke to Datadog, Inc DDOG to recap the ability to sustain growth in a challenging economy and a deeper dive into the consumption elements of Datadog's revenue model.
- Cikos expects companies to have an easier time growing business from existing customers than landing new logos as organizations take a disciplined approach to new projects. These dynamics favor Datadog, which generated 80% of incremental year-on-year revenue dollars from existing customers in Q1 and continues to drive healthy net retention above 130%, with gross retention in the "mid-to-high-90%s."
- Importantly, Datadog is a differentiated growth asset already delivering on critical growth & profitability metrics against the current investment climate and does not need to pivot strategy.
- Cikos views Datadog deliver a potent combination of product/market fit that should enable the company to execute against a significant opportunity with a capital-efficient business model.
- He believes Datadog has a go-to-market strategy that begins with the frictionless sale of infrastructure and progresses to the sale of the platform.
- Moreover, customers have noted that infrastructure monitoring is a "must-have" as they begin their cloud-native journey.
- He considers Datadog the beneficiary of multiple long-term tailwinds and is ready to execute against a large TAM.
- Cikos rated the stock as a Buy with a price target of $145.
- Price Action: DDOG shares traded higher by 0.47% at $86.52 on the last check Tuesday.
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