We recently published a list of Top 10 Stocks to Buy According to 12 West Capital Management. In this article, we are going to take a look at where Datadog, Inc. (NASDAQ:DDOG) stands against other top stocks to buy according to 12 West Capital Management.
Joel Ramin founded 12 West Capital Management in August 2011, establishing it as a New York-based hedge fund specializing in global investments across equities, equity-related instruments, and credit securities. Prior to launching 12 West, Ramin worked as an analyst at Bridger Capital, gaining experience in both long equity positions and short-selling strategies. Currently, he serves as the firm’s Managing Member and Portfolio Manager, overseeing investment decisions and advisory services for institutional investors in the United States.
12 West Capital Management focuses on providing tailored investment management solutions, leveraging a research-driven approach to identify opportunities across various markets. The firm actively engages in both long-term and short-term investments, aiming to maximize returns through strategic asset allocation and risk management. Its expertise spans multiple asset classes, allowing it to adapt to changing market conditions while delivering value to its clients.
Joel Ramin holds a degree from the McIntire School of Commerce, where he completed his undergraduate studies in finance in 2000. His background in finance and investment, combined with his experience at Bridger Capital, has shaped his approach to portfolio management at 12 West Capital. Under his leadership, the firm has built a reputation for its disciplined investment strategies and commitment to generating long-term growth for its investors.
According to its most recent 13F filing for the fourth quarter of 2024, 12 West Capital Management reported nearly $954.6 million in managed 13F securities, with its top 10 holdings accounting for a hefty 90.75% of its portfolio.
Our Methodology
The stocks discussed below were picked from 12 West Capital Management’s Q4 2024 13F filings. They are compiled in the ascending order of the hedge fund’s stake in them as of December 31, 2024. To assist readers with more context, we have included the hedge fund sentiment regarding each stock using data from 1009 hedge funds tracked by Insider Monkey in the fourth quarter of 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A close-up of a laptop with a software engineer coding on the monitor.
Datadog, Inc. (NASDAQ:DDOG)
Number of Hedge Fund Holders as of Q4: 83
12 West Capital Management’s Equity Stake: $38.08 Million
Datadog, Inc. (NASDAQ:DDOG) is a U.S.-based company specializing in observability solutions for cloud-scale applications. Its SaaS-based platform enables comprehensive monitoring of servers, databases, tools, and services, providing businesses with real-time insights. The company reported fourth-quarter revenue of $738 million, surpassing analyst expectations, along with adjusted earnings per share of $0.49. However, the company revealed that it had 462 customers with an annualized revenue run rate exceeding $1 million, falling short of analyst estimates by approximately 25 customers.
For the first quarter of 2025, Datadog, Inc. (NASDAQ:DDOG) anticipates revenue between $737 million and $741 million, with adjusted earnings per share ranging from $0.41 to $0.43, compared to analyst projections of $740.58 million in revenue and $0.46 per share. Despite its strong quarterly performance, the company’s guidance for both the first quarter and the full year fell below expectations, leading to a 9% stock decline on February 13. The company’s full-year guidance forecasts revenue between approximately $3.18 billion and $3.20 billion, with EPS projected between $1.65 and $1.70, significantly below the consensus estimate of $2.04 per share. Despite these conservative projections, Datadog has maintained its strong position in the cloud monitoring and security sector, outperforming competitors such as New Relic, Dynatrace, and Splunk.
Datadog’s success is fueled by its diverse product suite and ongoing innovation. Of its 23 products, 15 have already surpassed $10 million in annual recurring revenue, including offerings in cloud security, CI Visibility, and Cloud Cost Management. The company’s expansion into MongoDB monitoring, covering major database platforms like Postgres, MySQL, SQL Server, and Oracle, further solidifies its role as a comprehensive cloud solution provider. As of September 30, 2024, Datadog, Inc. (NASDAQ:DDOG) held $3.2 billion in cash and marketable securities, maintaining a strong financial position. Its non-GAAP operating margin improved to 25% in Q3 2024, reflecting operational efficiency. Looking ahead, the company projects Q4 2024 revenue between $709 million and $713 million, with full-year revenue expectations of $2.656 billion to $2.660 billion, reinforcing its growth trajectory and market leadership.
The Brown Capital Management Small Company Fund stated the following regarding Datadog, Inc. (NASDAQ:DDOG) in its Q3 2024 investor letter:
“Other examples of negative sentiment include portfolio companies that reported earnings that met or exceeded expectations, but only saw their share prices go up slightly, stay flat or even decline. For example, Datadog, Inc. (NASDAQ:DDOG) is a leading SaaS-based, information technology (IT)-monitoring and analytics software platform for developers, IT operations and business users. The platform automates the monitoring of infrastructure, applications databases, networks, logs and security. Datadog’s platform is differentiated by providing a unified view of these systems via a visual interface configured to the needs of each user (i.e., a single pane of glass). Datadog delivered solid operating results in the second quarter of 2024, reporting revenue growth of 27% and raising 2024 full year revenue, operating income and earnings guidance. Despite these solid fundamental results, Datadog’s share price was down 11.8% in the third quarter. We speculate that these market reactions are evidence of the negative environment for high-growth companies. For more, please see the Detractors section below.
Datadog, mentioned above, automates the monitoring of infrastructure, applications databases, networks, logs and security. The company delivered solid operating results in the second quarter of 2024, reporting revenue growth of 27% and raising guidance for 2024 full-year revenue, operating income and earnings. Datadog noted improving consumption and demand trends among its enterprise customers and stabilizing trends among its small and mid-sized customers. On its earnings call, Datadog management disputed that it has interest in large acquisitions, notwithstanding news articles on July 17 that Gitlab was seeking a buyer and Datadog is among the potential suitors. Despite solid fundamental results, Datadog’s share price underperformed in the third quarter of 2024. This may be due to its premium valuation and investor worries about Datadog’s ability to sustain its current strong revenue growth in a softer economic environment. We remain confident in Datadog’s ability to deliver durable growth over the long term. We believe Datadog has a massive and underpenetrated total addressable market that is growing about 10% annually. We also believe Datadog has a strong competitive positioning in infrastructure monitoring and is gaining market share.”
Overall, DDOG ranks 7th on our list of top stocks to buy according to 12 West Capital Management. While we acknowledge the potential for DDOG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DDOG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.