.August 1, 2024 10:02 AM

BTIG upgraded Datadog (NASDAQ:DDOG) to a Buy from Neutral, setting a new price target of $143 per share. They see a promising opportunity for Datadog to displace Splunk in the market.

Datadog is considered a key player in the observability market, with new product offerings like Flex Logs, LLM Monitoring, and Bits AI expected to drive significant growth. These innovations are seen as enhancing Datadog’s market position and growth potential.

Fieldwork by BTIG with partners, including large enterprises, suggests that cloud cost optimization initiatives are mostly complete, positively impacting observability spending.

Despite some cloud growth disappointments from Microsoft, the overall trend indicates improving growth among the top three hyperscale cloud IaaS providers, which is good news for observability spending.

BTIG believes Datadog is well-positioned to gain market share from Splunk following its acquisition by Cisco. This displacement opportunity could add around $270 million in incremental annual revenue to Datadog, potentially boosting its growth rate by 300 basis points per year through 2027.