What Happened:

Shares of cloud monitoring software company Datadog (NASDAQ:DDOG) fell 11.7% in the pre-market session after the company reported first-quarter results with billings falling below Wall Street's expectations. In addition, its new large contract wins slowed. On the other hand, revenue and EPS came in ahead of expectations during the quarter. Overall, this quarter's results seemed fairly positive, although the billings blemish means it wasn't perfect. Valuation is high, and the market was likely expecting more following bullish results from public cloud vendors like Amazon AWS, Microsoft Azure, and Alphabet GCP.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Datadog? Access our full analysis report here, it's free.

What is the market telling us:

Datadog's shares are very volatile and over the last year have had 11 moves greater than 5%. But moves this big are very rare even for Datadog and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The previous big move we wrote about was 14 days ago, when the company gained 7.7% on the news that Wells Fargo analyst upgraded the stock's rating from Equal-Weight (Neutral) to Overweight (Buy) and raised the price target from $130 to $150. The price target indicates a potential 15% upside from where shares traded when the upgrade was announced.

Datadog is down 1.8% since the beginning of the year, and at $113.28 per share it is trading 16.8% below its 52-week high of $136.15 from February 2024. Investors who bought $1,000 worth of Datadog's shares at the IPO in September 2019 would now be looking at an investment worth $3,011.

Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefitting from the rise of AI, available to you FREE via this link.