Datadog Is Beneficiary Of Multiple Long-Term Tailwinds, Well Braced To Execute Against Large Total Addressable Market: Analyst

Needham analyst Mike Cikos reiterates Datadog Inc DDOG with a Buy and maintains a $105 price target.
Cikos recently spoke with a former Datadog sales employee who spent ~5 years with the company before departing in 2021.
As per Cikos, organizations that first establish product-led growth can find it difficult to tack on a more dedicated selling motion due to the change in the required sales process, culture, and expertise.
Cikos' contact described the process as "taking your hand off the edge of the pool to get to the other side."
However, the analyst thinks Datadog has powerfully structured a multi-faceted go-to-market strategy through PLG and more traditional top-down selling.
In its early stages, customer use of Datadog was driven through a product-led go-to-market, which generated "avid, hands-on, fanboy users seeping into organizations and moving horizontally." While PLG resulted in a high-velocity, efficient sales model, "the problem is you get wide, but not high."
Datadog built an avenue to hold more strategic conversations with customer leadership regarding Observability, multi-module adoption, and consumption by layering on a high-touch, top-down sales motion. Following grassroots PLG adoption, the analyst believes Datadog established a beachhead position, where the company "then has license to conduct discovery across an organization."
The success of Datadog's aggressive go-to-market is evidenced by multi-product attach and "based on the positioning we do to own the mindshare of the buyer…We suck the oxygen out of the room to win the deal."
Cikos views Datadog delivers a potent combination of product and market fit that should enable the company to execute against a significant opportunity with a capital-efficient business model.
The analyst believes Datadog has a leading go-to-market strategy that begins with the frictionless sale of infrastructure and progresses to the sale of the platform (i.e., customers are showing a high propensity to expand to new products, given their familiarity with infrastructure).
Moreover, customers have noted that infrastructure monitoring is a "must-have" as they begin their cloud-native journey.
Datadog is the beneficiary of multiple long-term tailwinds, and the company is set up well to execute against a large TAM.
Price Action: DDOG shares traded higher by 6.70% at $72.46 on the last check Friday.

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