DDOG's Late-June Rally Failed To Carry The Stock Beyond Recently Hit Record Highs – Interestingly, Bernstein Now Flags Slowing Demand Signals

• Bernstein believes Datadog’s growth excluding AI will peak in the third quarter.
• The firm still thinks the company can be an AI winner, but they continue to see demand signals excluding AI “flatlining.”
• Wall Street remains very bullish on DDOG, with 42 of 46 analysts rating the stock a ‘Buy’ or higher.

Shares of Datadog (DDOG) caught significant investor attention on Monday after Bernstein downgraded the stock, flagging growth concerns.

At the time of writing, DDOG stock was down marginally but was among the top trending tickers on Stocktwits.

Bernstein raised its price target to $226 from $180, implying roughly 13% downside as of the stock’s last close on Thursday. However, the firm's revised price target is below the stock's recent highs.

Notably, the shares hit an all-time high of $278.70 on June 1. After a dip, the stock commenced a rally in late June but failed to breach its early-June highs, forming a lower high on the daily charts. Investors will be keeping a close eye on any potential moves toward this level for signs of a further rally.

Bernstein’s Takeaway

Analyst Peter Weed lowered the rating on the company to ‘Market Perform’ from ‘Outperform’ while cautioning about “exuberant investor expectations” for the third-quarter earnings and beyond.

According to a note seen by Seeking Alpha, Weed thinks Datadog can still be an AI winner but highlighted that demand signals are slowing in the company’s enterprise unit and in some AI labs.

Tough Comps For DDOG In Q4

The firm said the company’s fourth quarter could see roughly a 500-basis-point regression in growth, coming in at about 29% for this year, compared to investor expectations of high 30% to more than 40% growth.

“Not only do we start lapping tough comps in Q4, but as we’ve discussed in several other notes, we are seeing demand signals flatlining ex-AI (~85% of revenue) that causes ex-AI growth to peak in Q3,” Weed reportedly said.

However, Wall Street continues to be very bullish on DDOG, with 42 of 46 analysts rating the stock a ‘Buy’ or higher, while two rate it a ‘Hold’ and another two ‘Sell’ or lower.

What Retail Traders Think About DDOG

On Stocktwits, retail sentiment toward the stock remained in ‘bullish’ territory over the last 24 hours.

DDOG shares have gained 90% so far this year and have surged 70% over the last 12 months, outperforming the benchmark index.

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