Jefferies cuts Datadog stock price target on customer concentration concerns

Jefferies has reduced its price target for Datadog shares to $230 from $280, while holding onto a Hold rating. The stock is currently trading at $189.20, a decline of nearly 21% over the past week. Despite reporting a revenue beat of $57 million, or 5%, and strong growth in core business for the fifth consecutive quarter, Datadog's fourth-quarter outlook disappointed management.

This was due to the company assuming minimum commitments from its largest customer, which resulted in lower unit pricing and affected the sequential outlook. The company's impressive gross profit margin of 79.5% and undervalued stock as per its Fair Value analysis offer potential upside. However, Jefferies believes that Datadog's potential can be realized over time as the company diversifies away from customer concentration risk. The new target implies a valuation of 15 times earnings.