Datadog (DDOG) could see slower growth in H1, though its long-term growth potential is attractive, Morgan Stanley said Thursday.
Although the company is executing "as well as to be expected" amid a tight budget environment, it is expected to guide to about 20% revenue growth for 2025, which would be slightly below consensus on dollar- and consensus-growth bases, Morgan Stanley said in a note to clients.
"We see Datadog's ongoing evolution from a system of alerting into a system of action -- through expansion into cloud security and cloud service management -- as one of the most compelling opportunities in software over the next 3 to 5 years," Morgan Stanley said. "However, with shares near our price target and the pending tailwind from an AI inference cycle still likely several quarters away, we think the near-term risk/reward has become more balanced."
The firm downgraded its rating on the Datadog stock to equal-weight from overweight while maintaining its $143 price target.
The company's shares were down 2.8% in recent trading.
Price: 136.95, Change: -4.00, Percent Change: -2.84
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