Datadog Stock Leaps On S&P 500 Inclusion: Retail Sentiment Flips To Positive As Traders Look To Accumulate Shares

Datadog, Inc. (DDOG) shares rallied nearly 12% in Wednesday’s extended session after S&P Global announced that the company would be added to the prestigious S&P 500 Index.

New York-based Datadog is a provider of cloud applications monitoring and security platform.

Datadog stock is down approximately 5.5% year-to-date. 

The release from S&P indicated that Datadog will replace Juniper Networks in the index, effective prior to the opening on Wednesday, July 9.  Juniper was acquired by Hewlett Packard Enterprise (HPE) in a $14 billion deal, with the transaction closing on Wednesday.

The S&P 500 Index, a market-cap-weighted index, is considered the best single measure of large-cap U.S. equities, comprising 500 leading companies and covering approximately 80% of the total market capitalization. The eligibility criteria for addition to the index include a market cap of $22.7 billion or more.

Index inclusion generates positive sentiment toward the stock, as investors view it as a validation of the company’s credentials as a stable and growing entity. Also, funds tracking a particular index would load up on the stock to align their portfolio weighting with that of the index.

Datadog reported a solid first-quarter earnings beat in early May, with revenue rising 25% year-over-year (YoY) and exceeding the consensus estimate. Artificial intelligence (AI)-native customers accounted for 8.5% of annual recurring revenue, up from 6% in the previous quarter.

The company also notably raised its full-year revenue but suggested that gross margin pressure would result from deployment activity.

Following the quarterly results, Macquarie analyst Steve Koenig said, “We expect DDOG's stable usage trends, share gains in a growing market, and conservative guidance approach to position it for continued outperformance.”

On Stocktwits, retail sentiment toward Datadog stock improved notably to ‘extremely bullish’ (83/100) by late Wednesday from ‘bearish’ a day ago. The message volume was also ‘extremely high.’

Retail traders welcomed Datadog to the S&P 500 club with a bullish stance.

A user said he was buying more of the stock.

The Koyfin-compiled consensus analysts’ price target for Datadog stock is $139.28, implying a modest 3% upside potential. 

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