Why Investors Were Barking for Datadog Stock Today

Key Points

• An analyst feels the company is worth more than he had previously calculated.

• He raised his price target by 18%.

• 10 stocks we like better than Datadog ›

Highly specialized tech stock Datadog (NASDAQ: DDOG) received quite a treat from stock market investors on Monday, as they collectively sent the company's shares up by well over 4%. It was clear they took an analyst's bullish update on the stock to heart, since that increase trounced the S&P 500 index's 0.3% rise.

A generous price target lift

That prognosticator was BMO Capital's Keith Bachman, who published a new take on Datadog before market open. In that note, he raised his price target on the stock to $154 per share, which was quite the boost from his previous $130 assessment. In doing so, Bachman kept his outperform (i.e., buy) recommendation on the shares intact.

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Bachman's revision was based on a new calculation of his revenue estimate in the coming quarter for the company, according to reports. With that, he changed the price target to reflect what he believes is a fair multiple of 14 to 15 times Datadog's expected fiscal 2026 top line.

Formerly, he had pegged this at 13 to 14 times the forecast revenue.

Second-quarter success

For the most part, there hasn't been much proprietary news coming from Datadog recently. In early August, it published quite an encouraging quarterly earnings report, in which it not only scored a double beat on the consensus analyst estimates for the period, but also comfortably beat projections for the entirety of this year.

This was on the back of some rather encouraging growth numbers for the company. Revenue rose by 28% year over year to hit $827 million, while non-GAAP (adjusted) net income advanced 7% to almost $164 million.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Datadog. The Motley Fool has a disclosure policy.