offers a platform that monitors a customer's cloud activity, alerting it to any critical downtime snags. More importantly, Datadog's platform offers up actionable insights that can be seen across an entire company, breaking down the operational silos that keep different departments in the same company from getting on the same page. Datadog's analytical tools help clients make smarter decisions through increased visibility into their entire online presence.
Datadog charges a monthly subscription (and a discount for signing up for a year) which creates great predictable, recurring revenue. They also have a great dollar-based net retention rate, which is a metric that tracks how existing customers pay more for the service over time. Theirs is 146%, which basically means that among all its clients who have been around for at least two years, it's generating 46% more revenue over the past four quarters than it did during the previous trailing four periods. Anything higher than 100% is really good.
Datadog estimates that the market opportunity in this niche is $35 billion, and its current slice of that is less than 1%. Wayfair, Twitter, Zendesk, Mercado Libre and even Skechers are all customers.
Datadog is a growth play. They are growing revenue at 68% during a pandemic. So my thought is that growth will continue and the big drop this morning after earnings is a good chance to go long.
A lot of times with high growth companies like this they get sold off after earnings as asset managers take profits.
Datadog had a great quarter and even raised expectations, but still fell. A lot of times analysts have even higher expectations, or just want to take profits and so the stock drops. But I feel like that is a long term opportunity.