Cloud data platform company Datadog (NASDAQ:DDOG) stock could reach $300 driven by artificial intelligence benefits, according to analyst Todd Gordon in a CNBC column published on the 14th. Datadog provides a cloud platform that integrates data from corporate servers, applications, and cloud services to enable real-time system monitoring and immediate incident response. Gordon identified Datadog as one of the software sector stocks showing relative strength, citing the company's usage-based billing model and AI-driven growth momentum as key factors supporting the bullish outlook.
Datadog Stock Climbs 94% Over Past Year
Datadog stock recently reached $266, marking approximately 94% growth over the past year. The stock currently trades above both its 50-day and 200-day moving averages, with relative strength versus the S&P 500 index showing improvement, Gordon stated. The company's usage-based billing model generates revenue that naturally increases as customer cloud usage expands.
Cup-and-Handle Pattern Signals Technical Breakout
Technical analysis indicators point to continued upside potential, according to Gordon's assessment. After breaking through the $201 resistance level earlier this year, that price level converted into a support zone. A cup-and-handle pattern has formed in recent trading, opening the possibility for further gains targeting the $300 range, Gordon analyzed.
Usage-Based Revenue Model Drives 32% Growth in Q1 FY2026
Datadog's Q1 fiscal year 2026 quarterly revenue exceeded $1 billion for the first time, increasing approximately 32% year-over-year. Annual recurring revenue (ARR) surpassed $4 billion, with new customer contracts reaching record levels. The company's net revenue retention (NRR) rate remains above 120%, with approximately 75% of total revenue growth originating from existing customers adopting additional services.
AI Identified as Core Growth Driver
Gordon evaluated AI as Datadog's primary growth catalyst, noting that market forecasts for revenue and earnings over the next one to three years continue to be revised upward. Stocks showing simultaneous improvement in both price performance and earnings outlook tend to attract sustained institutional investment inflows, Gordon explained.
Valuation Concerns Prompt Split-Purchase Strategy Recommendation
Datadog currently trades at a forward price-to-earnings (P/E) ratio of approximately 108x and a forward price-to-sales (PSR) ratio of 10-11x. The stock surged roughly 140% over the past three months, with the current price trading approximately 10% above Wall Street's average target price of $230-240. Gordon stated that while Datadog's trend and earnings outlook remain positive, the current stock price assumes nearly perfect execution. He recommended a split-purchase strategy during pullbacks rather than chasing the stock at current levels.
FAQ
What price target did Todd Gordon set for Datadog stock?
Todd Gordon forecasted Datadog stock could reach $300, driven by AI benefits and technical strength including a cup-and-handle pattern formation.
What revenue milestone did Datadog achieve in Q1 fiscal year 2026?
Datadog's Q1 fiscal year 2026 quarterly revenue exceeded $1 billion for the first time, representing approximately 32% year-over-year growth, with annual recurring revenue surpassing $4 billion.
