Buy Datadog for Its Long-Term Growth Potential
The stock price of Datadog (NASDAQ: DDOG) hit all-time highs in November of 2021. But in 2022, it was all downhill as high-growth cloud stocks fell out of favor with investors in a rising interest rate environment. The company reported fourth-quarter 2022 earnings in mid-February of this year that failed to give investors much hope that things would improve in 2023. While it beat analysts' revenue and earnings estimates, its guidance did not meet expectations.
The near future looks rough. Many think the economy could sink into recession; the outlook for the company seems bleak, and its stock price continues to drop. So should you invest in Datadog, a company with a reputation as a high-quality, long-term investment, or should you wait and see how the economy shakes out?
As interest rates began rising in March 2022, spending on Datadog's products declined, and it worsened across that year. In the chart below, you can see year-over-year revenue growth fall off a cliff, quickly followed by the company becoming unprofitable. Growth investors are much less interested in unprofitable companies with decelerating revenue growth, so it's no wonder the stock price dropped.
Source Fool.com
