Monness Crespi Hardt Downgrades Datadog to Sell, Shares Fall Slightly

Datadog (NASDAQ:DDOG) shares fell more than 1% pre-market today after Monness, Crespi, Hardt analysts downgraded the company to Sell from Neutral, setting a price target of $98.

The analysts highlighted that challenging trends in the enterprise software sector and the unrealistic expectations from the generative AI hype have created an unsustainable environment for software stocks with high valuations. They pointed out that Datadog's valuation was already considered high, and the recent rally in the stock has further inflated its value, making it susceptible to selling pressure.

Despite recognizing the positive long-term prospects for Datadog, driven by the cloud trend, digital transformation, and the company's expanding portfolio, the analysts believe that the current valuation is too high. With software stocks under pressure and the economic outlook appearing bleak, the analysts downgraded Datadog to a Sell rating.