Datadog Stock is a Barking Buy
Using the rifle charts on the weekly and daily time frames enables a more precise near-term view of the price action playing field for DDOG stock.
Cloud-based security monitoring and analytics platform Datadog (NASDAQ: DDOG) stock has recently bounced on its Q4 2021 earnings report. The enterprise data monitoring solutions provider continues to experience hypergrowth on both top and bottom lines. Digital transformation and cloud migration drives the need for observability and security under a single integrity cloud solution, Datadog's wheelhouse. The Russian invasion of Ukraine has raised cybersecurity concerns as the war is staged not only physically but also digitally. As cloud migration and digital transformation continue to accelerate, the need for Datadog monitoring solutions continues to grow as indicated by its nearly 84% quarterly growth indicated on its Q4 2021 earnings release. The Company continues to strike large enterprise deals doubling its $1 million customers from a year ago. Prudent investors looking for exposure in the enterprise cybersecurity segment can watch for opportunistic pullbacks in shares of Datadog.
Q4 2021 Earnings Release
On Feb. 10, 2022, Datadog released its fiscal fourth-quarter earnings report for the quarter ending in December 2021. The Company saw earnings-per-share (EPS) of $0.20, excluding non-recurring items, versus consensus analyst estimates of $0.11, beating by $0.09. Revenues rose 83.7% year-over-year (YoY) to $326.2 million beating analyst estimates for $291.42 million with non-GAAP operating margin of 22%. The Company saw $1 million+ ARR customers grow to 216, up from 101 in prior year and launched a sensitive data scanner. Datadog CEO Oliver Pomel commented, "We are proud of our strong execution in fiscal year 2021, with 70% year-over-year revenue growth, $287 million in operating cash flow, and $251 million in free cash flow. We continue to believe we're in early days with our opportunities in observability. And we are just starting our efforts in cloud security and developer-focused products. We have much to do, and we're excited about what we're working on for 2022 and beyond."
Datadog issued mixed guidance for fiscal Q1 2022 EPS to come in between $0.10 to $0.12 versus $0.12 consensus analyst estimates on revenues between $334 million to $339 million versus $305.94 million estimates. The Company expects fiscal full-year 2022 EPS between $0.45 to $0.51 versus $0.58 consensus analyst estimates. Revenues are expected between $1.51 billion to $1.53 billion versus $1.4 billion analyst estimates.
Conference Call Takeaways
CEO Pomel outlined the high growth at scale and strong business efficiencies in the quarter and 2021. The Company grew customers up to 18.8K from 14.2K in 2020 with 2,010 customers with annual run rates (ARR) of $100,000 or more generating nearly 83% of total revenues. This is up from 1,228 from the end of last year. Datadog also doubled its $1 million plus ARR customers to 216, up from 101 at the end of last year. The Company generated $107 million in free cash flow as positive business trends continued through Q4 2021. CEO Pomel commented on its platform strategy, "As of the end of Q4, 78% of customers were using two or more products, up from 72% a year ago, 33% of customers were using four or more products, up from 22% a year ago and as a sign of further adoption of our platform, we saw that 10% of our customers were using six or more products, which is up from 3% last year." The Company released it Sensitive Data Scanner which enables customers to cost effectively discover, classify, and protect sensitive information. The Company also announced the acquisition of CoScreen, which enables real-time screen sharing and joint work space collaboration amongst teams, enabling a shared work environment. CoScreen is a step up from existing general purpose video conferencing, which usually focuses on one-to-many in a presentation or conversational format. CoScreen enables individual work to be shares across the team in a many-to-many multiple member sharing and collaboration dynamic that bolsters productivity. He concluded with its largest multimillion dollar deal with a major media company, Datadog was able to provide a single integrity cloud solution which convinced the company to replace its existing monitoring solution and replace eight different tools with five of its product.
DDOG Price Trajectories
Using the rifle charts on the weekly and daily time frames enables a more precise near-term view of the price action playing field for DDOG stock. The weekly rifle chart peaked near the $199.29 Fibonacci (fib) level before the collapsing to the $119.19 area before coiling. The weekly rifle chart downtrend is stalled as the rising 5-period moving average (MA) at $154.58 continues to close the channel to the 15-period MA at $161.45 powered by the rising weekly stochastic. The weekly 50-period MA is at $130.97. The weekly market structure low (MSL) buy triggered on a breakout through $153.94. The weekly upper Bollinger Bands (BBs) sit at $211.99. The daily rifle chart is breaking down as the falling 5-period MA at $157.30 crossed through the 15-period MA at $160.78 nearing the daily 50-period MA support at $154.60 with daily 200-period MA down at $138.87. The daily stochastic formed a mini inverse pup under the 80-band powering the sell-off with daily lower BBs at $127.85. Prudent investors can watch for opportunistic pullback levels at the $150.34 fib, $146.88 fib, $141.70 fib, $135.21 fib, $127.39, $124.22 fib, and the $117.44 fib level. Upside trajectories range from the $184.04 fib level up towards the $203.17 fib level.
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