5 Best Cybersecurity Stocks Hedge Funds Are Buying

3. Datadog, Inc. (NASDAQ:DDOG)

Number of Hedge Fund Holders: 78

Fatima Boolani at Citigroup maintains a Buy rating and a $125 price target on Datadog, Inc. (NASDAQ:DDOG) as of August 30.

Datadog, Inc. (NASDAQ:DDOG) operates an observability and security platform for cloud applications. It is based in New York.

In the second quarter, 78 hedge funds were long Datadog, Inc. (NASDAQ:DDOG). Their total stake value was $2.4 billion.

RiverPark Advisors said the following about Datadog, Inc. (NASDAQ:DDOG) in its first-quarter 2023 investor letter:

“Datadog, Inc. (NASDAQ:DDOG): DDOG was a top detractor in the quarter. The company reported strong 4Q results including 44% revenue growth and 30% earnings growth but gave cautious revenue guidance for 2023. Macroeconomic headwinds have caused clients to slow the transition of workloads to the cloud and instead to optimize current capacity. Despite this temporary slowdown, DDOG still expects revenue to grow nearly 25% in 2023.

As businesses have transitioned to cloud software infrastructure, much of which is in isolated data silos, it has become increasingly difficult for data engineers to monitor and analyze system performance. Datadog provides a SaaS software platform to monitor and analyze the system performance of software applications and IT infrastructure by giving users a single page view to observe their company’s technology stack. The company has quickly grown its revenue from $100 million in 2017 to $1.7 billion in 2022 and, we believe, should continue to grow revenue at more than 20% annually as it penetrates its $40 billion and fast-growing market. Less than 10% of software applications are currently monitored. The company’s dollar-based net retention rate has been 130%+ as existing customers continue to use an increasing number of products and the company continues to add new features. As of 4Q22, 81% of customers used 2+ products, while only 18% of customers used 6+ products (up from less than 1% two years ago). As an extremely capex light software business, DDOG already has significant free-cash-flow ($350m in 2022) and free-cash-flow margins (21% in 2022).”