3 Reasons Why Datadog is Outpacing Its IPO Price

The company has traded above its $27 IPO price since going public.

Last Thursday, the cloud software service Datadog went public at $27 per share. The company first filed to go public in late August with an initial price range of $19 to $22. Company leaders later realized that wasn’t enough, and increased the IPO price. 

That seems to have been a good choice since Datadog’s shares immediately jumped 39% above its IPO price, ending the day at $37.55. This put the company’s market valuation at $10.9 billion. Datadog joins the ranks of Zoom and Crowdstrike, two other companies that went public and earned valuations of over $10 billion. 

There’s a lot of appeal to investing in a company like Datadog. The company provides reliable metrics without the massive spending associated with other industries. Listed below are three reasons Datadog is a good investment.

The company’s services are in demand

Datadog provides cloud monitoring and analytics tools and competes with companies like Amazon, Microsoft, and Cisco. The company provides subscription-based services that help its clients ensure their applications and software are working correctly.

Technology companies like Datadog release quarterly dollar-based net retention rates. If the retention rate is higher than 100%, this means customers are spending more money on services than they were a year earlier. Datadog’s most recent retention rate was 151%, indicating it has a strong base of happy customers. 

Cisco reportedly tried to buy the company

Bloomberg reported that Cisco recently approached Datadog and offered to acquire the company for $7 billion. The company obviously said no, believing it would worth more as a publicly-traded company. (Spoiler alert: They were right.)

If this is true, the fact that Cisco wanted to acquire Datadog before it had a chance to go public says something about the company’s growth prospects.  

Datadog is growing quickly

Originally founded in 2010, Datadog has grown quickly in recent years. The company currently has more than 8,800 customers and its revenue doubled last year to reach $198.1 million. Halfway through 2019, the company’s revenue was already up 79%. 

The company is still in the early stages of its growth. But Datadog’s high customer retention rate and strong overall growth indicate the company should continue to be a solid investment.