Datadog stock plunges 45%, analysts recommend buying

The Nasdaq Composite index has experienced a correction, dropping 12% from its all-time high in December 2024. This follows a strong 28% rise during the previous year, largely due to growth in artificial intelligence (AI) stocks. One particularly notable stock is Datadog, which helps businesses monitor their digital infrastructure. Its stock is currently down 45% from its peak in 2021. Despite this dip, Wall Street remains optimistic, with no analysts recommending to sell. Most analysts have given it a strong buy rating. Datadog has expanded its offerings into AI, launching tools to assist in monitoring large language models. This expansion is crucial as the complexity of AI increases. Major companies, including Sony, use Datadog’s platform to fix technical issues quickly, which can save significant time and costs. In 2024, Datadog reported $2.68 billion in revenue, reflecting a 26% increase from the previous year. The company's AI segment is growing fast; in the last quarter of 2024, AI-related revenue doubled to 6% of total revenue. Datadog has managed costs effectively, leading to a significant increase in net income. Currently, Datadog's stock is trading at a price-to-sales ratio of 13.9, much lower than its historical average. Analysts believe this presents a good buying opportunity. Many predict significant upside, with an average price target of $161.74, suggesting a potential gain of 54%. With growing demand for AI solutions, Datadog could see its revenue from AI customers rise even further. Investors might consider taking advantage of the current market correction to buy Datadog stock for long-term growth.