Datadog's Growth Potential Sparks Price Target Boost to $200

Loop Capital analysts raised their price target for Datadog (NASDAQ:DDOG) to $200 from $160, maintaining a Buy rating on the stock. The increase reflects confidence in the company’s long-term growth trajectory, bolstered by an expanding total addressable market (TAM) and the strategic diversification of its product portfolio.

Datadog’s TAM, previously estimated at $35 billion (excluding its entry into the security segment), aligns closely with broader industry estimates for the IT operations management (ITOM) market. However, the company’s ongoing expansion into new areas, including security, is expected to significantly increase its market opportunity. By projecting a conservative annual growth rate of 17.5% for the next decade, Datadog’s TAM could reach approximately $175 billion by 2034.

The analysts’ valuation assumes Datadog will capture 15% of this market, with a free cash flow (FCF) margin of 30%, translating to an estimated $7.9 billion in FCF by 2034. Using a discount rate of 12.8% (Datadog’s current cost of equity), the net present value (NPV) of its 2034 FCF is approximately $2.4 billion. Applying a 30x multiple to this NPV results in an intrinsic value estimate of $200 per share.