Datadog, a cloud software company that sells analytics and monitoring tools, surged 39% in its stock market debut on Thursday, becoming the latest subscription software company to be met with enthusiasm by public market investors.
Trading on the Nasdaq under the ticker symbol “DDOG,” the stock climbed to $40.50 out of the gate, up from the $27 IPO price, valuing the company at $10.9 billion. It closed the trading day at $37.55.
Datadog, which competes with cloud providers Amazon and Microsoft, as well as Cisco, Elastic and Splunk, follows Crowdstrike, Zoom and other fast-growing software companies onto the public markets, where investors are showing a preference for the more predictable metrics than they get from cash-burning consumer companies like Uber and Lyft.
Datadog’s subscription-based offering helps developers and administrators make sure their applications and underlying infrastructure are working properly. The software can track performance for systems running in public clouds, or in corporate data centers.
At its current market cap, Datadog is being valued at about 41 times trailing 12-month revenue, which makes it among the priciest cloud software stocks on the market. Zoom is the only company with a higher price-to-sales ratio at about 50, according to FactSet, and Crowdstrike is next at 44.
In the first six months of 2019, Datadog’s revenue jumped 79% to $153.4 million. The company recorded a net loss of $13.4 million in the first half of the year as research and development costs doubled and sales and marketing costs increased almost as much.
Datadog first filed to go public on Aug. 23. It later provided a price range of $19 to $22, before raising the range this week to $24 to $26. It ultimately priced $1 above that range, selling 24 million shares and raising $648 million. Bloomberg reported on Wednesday that Cisco offered to buy Datadog for more than $7 billion in recent weeks, citing people familiar with the matter. The company wasn’t interested, according to the report, and Datadog CEO Olivier Pomel declined to comment to CNBC on Thursday.
Underwriters will have the option to buy an additional 3.6 million shares. Morgan Stanley, Goldman Sachs, J.P. Morgan chase and Credit Suisse led the IPO.
Datadog was founded in 2010 and is based in New York. Earlier investors include Index Ventures, OpenView Venture Partners, ICONIQ Strategic Partners and RTP Ventures.
It’s lock up period expires soon, please could this be added
Already trading on quite a few other platforms
Got my vote.
The killer stat:
Datadog’s dollar-based net retention rate 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.
A bump for this:
Who are they?
Datadog operates a fast-growing platform that monitors customers’ cloud activity and mines it for business insights.
- Datadog is helping companies get smarter and provide more reliable service thought its cloud monitoring and actionable analytics.
- In a climate where recent IPOs have spluttered, Datadog succeeded since going public at $27 mid-september last year.
- Datadog’s ability to retain and build on its customer base has been impressive, with its dollar based net retention rate clocking in at 146%.
*Companies enter into monthly subscriptions with discounts available for those paying for a year, and this recurring revenue is helping the company crank out steady revenue.
- Datadog has some big customers already - Wayfair, Twitter, ZenDesk, MercadoLibre, Skechers. In total it has 8,800 b2b customers, typically larger companies.
- Datadog’s USP compared to competitors is that it gives each department of their clients the ability to better look at what the others are doing. It’s not always easy to sahre information between IT, developers, operations teams and business users Datadog solves that.
It’s stock is trading 31.6% below all time high, at the time of writing.