Top Tech Stock I Have To Buy Right Now (And It’s Not Soon)

Tech stocks with high valuations have been crushed lately. heavy technology Nasdaq Composite The index is down more than 25% year-to-date, and many tech stocks are down even more. However, there are a few companies that are holding back despite the almost complete core implementation.

One of the best examples of this type of company datadog (DOC 0.80%). The stock is down over 45% in 2022, yet the business continues to deliver amazing results. Datadog is also seeing significant improvements in its profitability and cash flow, which is not uncommon among other high-growth stocks.

Because of this and because of the opportunities it has over the next five years, Datadog is one of the best stock opportunities I see on the market right now.

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Datadog sees the future of observation

Datadog specializes in helping companies ensure that their cloud applications run smoothly and perform to the level that customers expect. The company started as a unified data platform, but has since gotten into infrastructure, user experience, and security monitoring. It now has 26 tools to ensure business cloud infrastructure runs smoothly, and is one of the best dogs in the application performance monitoring space, according to Gartner.

How did Datadog become one of the leaders in this field? The company continues to create stronger products with more integrations to make its platform more valuable to its users. The company made great strides in this regard in the first quarter, specifically in its partnership with Microsoft. This partnership puts Datadog within the framework of Cloud Certification for Azure, which will help Azure customers who are beginning their journey in the cloud with Datadog’s vision. This is another feather in the Datadog’s cap, further enhancing its capabilities.

At the same time, the company is rapidly expanding into new markets, the creation of which is the public sector. At the end of 2022, the company received the FedRAMP mandate, which allows it to sell to the government and the public sector.

Adoption pays off

This continuous innovation has paid off massively. The company now has nearly 20,000 customers, who are rapidly expanding their relationships with Datadog. Its net retention rate was more than 130% in the first quarter, marking the 19th consecutive quarter of retention rates above 130%. These users seem to be spending more due to the increased use of the product. At the end of the first quarter, 35% of customers had used four or more Datadog products. It was 25% of customers a year ago.

As long as Datadog continues to have best-in-class products, these customers will likely continue to increase their usage, which will allow Datadog to maintain its leadership.

The competitive advantages and increased customer loyalty that the company is witnessing are paying off financially. In the first quarter, Datadog saw revenue growth of 83% year-over-year to $363 million. But even more impressive is the company’s ability to turn that growth into cash flow and profitability. Its net income was $9.7 million in the first quarter of 2022, which jumped from a loss of $13 million in the first quarter of 2021. In addition, the company’s free cash flow increased by a staggering 192% to $130 million during the same period.

Datadog faces stiff competition from companies like Dynatrace And fresh leftoversDespite this, the company is making impressive progress in both its bottom line earnings.

Datadog barking over the right tree

If the company continues to use its advantage to see more adoption, Datadog could tap into a huge market. It believes its total opportunity in the monitoring space is $42 billion today, but it could become $53 billion by 2025. The company expects only $1.61 billion in revenue for 2022, which means there is still plenty of room for Datadog to expand in the future.

Aside from the competition, Datadog’s main danger is its extremely high rating. The shares are trading above 33 times sales and 135 times free cash flow, so they’re by no means cheap at the moment. However, this business is performing at an all-time high, and with its prime potential, Datadog looks attractive to own in the long run. Because their value is higher, you may want to convert your average dollar cost into a position rather than buying the whole.

While this stock has a high value, that doesn’t mean you should pass it up. The company operates in a vast area and as one of the dominant forces with multiple competitive advantages. All of this means that you should consider owning a stock in Datadog.

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