*Here is a simple analysis of Data Dog. I encourage any investor to change some of the assumptions and post a compelling reason why it makes sense at today’s levels.*

*TTM Revenue : $1,192B*

*Assume 30% growth for the next 5 years*

*5 Year Revenue Target : $3,500B*

*Assume Target Operating Margin of 20%*

*5 Year Profit Target : $680M*

*Target Profit Multiple : 30x*

*Target Market Cap : $20B - $25B*

*Its trading at $35B valuation today - Yikes.*

It seems too pessimistic to start off with 30% revenue growth assumptions, after the company has seen revenues of $101m, $198m, $363m, $604m, and $1029m from 2017 to 2021, so up 70% last year. Last Q was $363m, compared to $198m in Q1 2021 which is up 83%. TTM $1193.3 compared to TTM of $670.8 a year prior, so that’s up 78%.

Maybe that won’t hold up for 5 years, granted, but if you’re saying it will be only 30%, you need to justify why growth will suddenly fall off a cliff.

Say you give them 60%, 50%, 40%, 35% and 30% in the next 5 years, you get $7,037m in 5 years, instead of $3500m. (or instead of $4431m, which is $1193.3*1.3^5; I’m not sure where you got $1192, or where you got $3500…)

If you give them a 20% margin as you suggest (sounds reasonable, although it could be higher), that would be $1407m, meaning that at their current market cap of $31.8b (not $35b!), they are trading at 23 times their earnings in 5 years.

In other words, even if current growth only slows down slowly, a final P/E of 23 is consistent with 0 returns in the meantime. Positive share price returns require more optimistic assumptions. It’s not for me, but it’s not crazy if you have reasons to believe that margins might be higher than 20% or growth might be a bit better.

dtb