Guess I should go browse their earnings report quickly.
Surprised someone didn’t already post over here, as it is already 4:37 pm and DataDog seems to be the “hottest Saul board stock” of the moment based on Saul’s huge quickly-built position and I think Deputy Board Manager Austin Lieberman may have also added to it bigly within the past week.
Headline numbers:
88% year-over-year revenue growth (to $95.9M)
GAAP loss was only $4.2M
non-GAAP had a tiny gain
OCF was $3.8M, with FCF of only negative $3.7M (inferring $7.5M of CapEx)
Cash and Equivalents of $771M (which is not a whole lot more than the $709M raised in their IPO)
Great numbers.
85%+ growth rate.
This was q3 and fy is expected $350m.
Market cap was $10b…so maybe 11-11.5b if this pop holds.
Still dont get why they should get double the market cap (and more than double the P/S) of ESTC that is growing at 60% in their q1 w expected $415m for full FY, yet would be half the market cap.
Just my take. Recent history hasnt been kind to expensive IPOs after they are 9-12 months in…prices have tended to retrace.
On plus side for ESTC owners…i think this bodes as a positive for their upcoming ER.
Gotta love the accelerating growth rate the past few quarters (especially considering that Q3’19 was up against a prior year comparable quarter that had grown 91%!), while at the same time increasing Gross Margin % the past few quarters too.
Granted Q3 of last year also had 76% margins so there could potentially be something about the third quarter that is seasonal and makes margins a little higher that I am not aware of, but regardless, looks like a great quarter.
85%+ growth rate. This was q3 and fy is expected $350m.
Market cap was $10b…so maybe 11-11.5b if this pop holds.
Still dont get why they should get double the market cap (and more than double the P/S) of ESTC that is growing at 60% in their q1 w expected $415m for full FY, yet would be half the market cap.
Just my take. Recent history hasnt been kind to expensive IPOs after they are 9-12 months in…prices have tended to retrace.
On plus side for ESTC owners…i think this bodes as a positive for their upcoming ER.
Glta, Dreamer
Yes, great numbers. My only concern with DDOG is the valuation and recent multiple compression in high growth stocks. It’s nice to see that it’s getting a pop with a beat and a raise. This is a good omen for our other favored growth stocks.
I had opened a decent sized starter position and sorta wish I had more but this may be a name to scale into over time given recent volatility.
Still dont get why they should get double the market cap (and more than double the P/S) of ESTC that is growing at 60% in their q1 with expected $415m for full FY, yet would be half the market cap.
Hi Dreamer,
Could it be because Datadog is at breakeven while Elastic’s losses have increased each the last three quarters from 16 cents to 28 cents to 32 cents.
Or maybe because Datadog’s rate of revenue growth the last three quarters has been accelerating from 76% to 82% to 88%, while Elastic’s has descended from 70% to 63% to 58%.
Or maybe because Datadog had POSITIVE Operating Cash Flow of $3.8 million this quarter (and $10.8 million in 2018), while Elastic had NEGATIVE Operating Cash Flow of $31 million near as I can figure over the last three quarters.
Now tell me why anyone WOULD choose Elastic over Datadog? Because it’s “cheap”? Cheap stocks are generally cheap for a reason, or several reasons.
Just my take. Recent history hasn’t been kind to expensive IPOs after they are 9-12 months in…prices have tended to retrace.
Datadog has just come through the worst meltdown in these stocks since we’ve been holding them, right after its IPO, and has done very well, thanks.
One metric that looked good was they had 727 customer with ARR of $100,000 and reported
an increase of 93% with a count of 377 as of
end of Sept. Looks like the some nice expansion
in sales. Is this what is called Land & Expand"?
Recently took some of my ESTC, which was oversized, and swapped for some DDOG. Have about a 5% position as of close.
This is really a business doing great. So yeah it’s going to be expensive.
Really interesting comments on APM and a question from analyst. I’m paraphrasing from memory as I don’t have the actual transcript.
Q. Reports are only about 5% of applications are monitored, why is that and is that an opportunity?
A. The cost of legacy APM makes it difficult to get value out of the APM unless it is for your most value-adding applications. So enterprises are only monitoring the most important and the most critical. So DDOG presents a more cost effective solution so they see great potential for more applications being monitored in the future. More and more applications will be monitored.
That seems like a long runway. Also makes what Elastic is doing attractive as well. Monitor as many apps as you can fit into your data set. But DataDog pricing is very superior to the New Relics of the world, and is itself disruptive.
That was the first I heard of 5% of applications being monitored. And they also talked a lot about synthetics which they launched recently and it was “very strong right out of the gates”.
Synthetics is like a companion to APM that “simulates” end user experience with your application to find issues before they happen to actual users.
Hey, I told you all about Datadog over and over, but I couldn’t get much love for it. (Too “expensive”).
In my end of Sept report I told you I had taken a 1% position (it was shortly after their IPO).
On Oct 7th I wrote it up and explained that I had pushed it up to a 7% position in a week, and why, and said that it was unusual for me to go that fast (except for Alteryx).
In my end of Oct report I told you that it was up to 12.7%, and why. That was in one month! It was up to 14.5% before tonight’s pop, and my third largest (after Alteryx and Okta). I try to go for quality.
Enterprises will quadruple their application performance monitoring (APM) due to increasingly digitalized business processes from 2018 through 2021 to reach 20% of all business applications.
That explains the 5% as of the end of 2018 and that’s really amazing to quadruple the use by 2021. That means a lot of room for expansion in this market. And room for smaller entrants to grow rapidly.
If you see the vendors, Neither Datadog nor Elastic are included. But both are honorable mentions that didn’t meet one or more of the inclusion criteria. So probably revenue derived solely from APM or one or more of the APM features.
Dreamer, the reason stocks like DDOG and TTD and evening OKTA and COUP are doing well in this market is because they either have earnings or they are showing strong progress towards a clear path to profitability. ESTC of all others especially does not show good earnings clarity. Rev growth accelerating is not enough in this current market.
I did further research to try and understand why AYX has not started a recovery and cannot hold on to any gains and after reviewing the earnings again, although to me and likely many others on this board, the company gave NON GAAP EPS guidance below expectations. They guided for .27 - .30 NON gaap eps and apparently Wall Street wanted .33. I’ve done a lot of research to try and figure out our current market and it appears the market prefers EPS or a clear path towards EPS and cash flow with moderate rev growth over hyper growth with unclear EPS. Even though AYX had increasing revenue, apparently the EPS guidance was more important.
I’m not sure when or if the market will turn towards growth at all costs like they were earlier in the year or if a couple of failed unicorns has made wallstreet much more disciplined on valuation and actual earnings strength.
This concerns me mainly for CRWD due to the still high valuation with negative earnings and that my cost basis is at about -35%. and for ESTC because they aren’t showing a clear path towards earnings. I’m down about 14% for ESTC.
Not sure how or if I’ll reevaluate my portfolio.
DDOG earnings were incredible but I’m worried about their current valuation. It’s very high. I wish I bought the stock when it was at $27.
Both will do about $350M rev this year. So in that sense good candidates for comparison/reference.
Rev Growth: AYX 55% vs. DDOG 75%
Gross Margin: AYX 90% vs. DDOG 75%
Adj Net income: AYX $40M (69M shares x $0.59 adj EPS) vs. DDOG negative (-$0.12 adj EPS)
CFFO: Both could be positive
FCF: AYX positive vs. DDOG neg
AYX 65M diluted shares vs. DDOG 285M
Yet, AYX market cap is only $6B while DDOG, with the potential pop, could be $11B. Almost double AYX value. Whether you look at P/S or EV/S (TTM and 2 yrs out) or P/GM…AYX looks like of much better value.
In addition, AYX typically has 2-3 year duration contracts. No refund even if customers back out in midway. DDOG has annual and monthly subscriptions. When going gets tough, DDOG most likely will experience a certain amount of cancellation from the monthly subscribers. CRM CEO Mark B. once commented that their biggest mistake at CRM’s early phase was to allow monthly sub.
Have some shares so happy to see the AH pop. But I obviously am missing the shining points of DDOG. Could someone shed some more lights here?
The market went from pay anything for growth to pay anything for growth plus path to profitability. In both of these cases the more recent the IPO, the more shiny and new the toy, the earlier you can get in on the ground floor.
The fact that CRWD was valued at $3 billion in private placement last year then IPOed at around $12 billion, went all the way to $23 billion, and now at $10 billion, on nothing other than continued growth and unchanged outlook should tell you all you need to know about Mr Market’s bipolar personality and whether you should be looking to him as a source for guidance and wisdom.
I think a lot of this occurred with the failed WeWork IPO. A real estate sublettor billing itself as a tech company talking about how many customers it had on its “platform.”
Ayx grew at 65.2% this latest quarter, not 55%. I believe you were looking at Q2.
Either way yes AYX seems like a much better value and to me it seems like such a buy right now. But it’s been bouncing around a couple dollars up or down for a month, even after their earnings report.
So i dont know what it will take to get the market to buy Ayx again.
Not sure what to do with crwd anymore. It’s valuation during its IPO makes it very hard to appreciate until it reports further earnings to lower its valuation.
DDOG just showed us a great Q. I only bought 1% because of the valuation. I may buy more with them showing they’re close to profitability
I have been thinking about this for couple weeks and I agree with your thoughts about people who want invest in seeing clearly path to making positive cash flow even profitable is priority things to do.I may call that as post SaaS or SaaS 2.0.
Both will do about $350M rev this year. So in that sense good candidates for comparison/reference.
Rev Growth: AYX 55% vs. DDOG 75% Gross Margin: AYX 90% vs. DDOG 75% Adj Net income: AYX $40M (69M shares x $0.59 adj EPS) vs. DDOG negative (-$0.12 adj EPS) CFFO: Both could be positive FCF: AYX positive vs. DDOG neg AYX 65M diluted shares vs. DDOG 285M
The problem with this kind of comparison is that it is static, it does not take into account where the companies are in their lifetimes, where they are on their “S” curves. You can’t compare the productivity of an adult vs. a child. David Skok’s presentations make this very clear, at the start SaaS is in the land and expand phase with negative earnings and negative cash flow in the expectation of generating a positive CAC to LTV relationship. He specifically mentions that often this is not understood even at BOD levels.
How do AYX and DDOG compare? Yahoo says:
DDOD: The company was founded in 2010 and is headquartered in New York, New York.
AYX: Alteryx, Inc. was founded in 1997 and is headquartered in Irvine, California.
I have been thinking about this for couple weeks and I agree with your thoughts about people who want invest in seeing clearly path to making positive cash flow even profitable is priority things to do.I may call that as post SaaS or SaaS 2.0.
This is the same issue as my previous post, where on the “S” curve do you want to invest? Saul prefers 60% over 40% revenue gains so he is clearly liking the early part of the “S” curve. A value investor will want to invest later in the "S curve. In the older, slower days there was less of a reason to take the growth dynamics into account but the digital economy is changing so fast that it is important to keep the growth dynamic in mind.
I would like long time followers of this board to pretend that they don’t know they are reading a DataDog thread and then consider the following information:
Could it be because Datadog is at breakeven while Elastic’s losses have increased each the last three quarters from 16 cents to 28 cents to 32 cents.
Or maybe because Datadog’s rate of revenue growth the last three quarters has been accelerating from 76% to 82% to 88%, while Elastic’s has descended from 70% to 63% to 58%.
Or maybe because Datadog had POSITIVE Operating Cash Flow of $3.8 million this quarter (and $10.8 million in 2018), while Elastic had NEGATIVE Operating Cash Flow of $31 million near as I can figure over the last three quarters.
This should sound very familiar. These are similar to the exact same arguments that Saul made when he was pounding the table for one 3D printing company over another. He said why would you choose company XXZ when PSIX has numbers that are sooo much more favorable???
Now tell me why anyone WOULD choose Elastic over Datadog?
Wading into waters here above my technical knowledge
1: DDOG relies heavily on ESTC
2: DDOG is eating up ground in APM space, but has shown no expansion…emerging market and NEWR is victim
3: ESTC has yet to report earnings, but is one of the most confident guides in the SaaS world
4: ESTC has many more future market options than APM
The market rewards acceleration. DDOG certainly is a worth stick. But it shouldn’t be ONE or the OTHER.
when he was pounding the table for one 3D printing company over another. He said why would you choose company XXZ when PSIX has numbers that are sooo much more favorable???
As I recall they were not 3D printing but Nat. Gas engine companies. Westport was the company with dubious profitability. Things went very sour for Westport. (Although ironically you could have trebled your money if you waited for it to sink to a dollar before investing).
Saul was equally prescient then as he is now, although his investing criteria have changed considerably.