Datadog has downside revenue risks – BofA

Datadog (NASDAQ:) was downgraded to Neutral from Buy at BofA on Monday, with analysts downgrading the stock to $105 from $123 per share.

Cautious demand for DataDog’s products limits its potential upside, according to the analysts. They acknowledged that DDOG is a “solid business” but has downside revenue risks.

“Our demand checks and scenario analysis suggest downside revenue risk. We lower estimates to below consensus: 2024 revenue to $2.4bn (5% below Street); and 2025 revenue to $2.9bn (12% below Street),” the analysts explained.

“DDOG’s premium offering remains best-of-breed as a differentiated end-to-end observability and cloud security platform with customer logo growth likely keeping DDOG as a core holding,” they noted.

However, the investment bank views the upside as “likely capped” based on conservative demand, competitive threats, and meaningful AI tailwinds likely coming into play in the second half of 2024, potentially “constraining the growth profile.”