DDOG
Datadog, Inc.
$260.36
High-Growth Software
80%
Revenue × Terminal Margin DCF
Strong
·
Conviction
Overvalued
Trading 74.9% above fair value
You pay
$260.36
Bear
$70.97
Fair
$148.88
Bull
$209.52
Bear
$70.97
-72.7%
18% rev growth, 20% terminal margin
Fair
$148.88
-42.8%
30% rev growth, 26% terminal margin
Bull
$209.52
-19.5%
35% rev growth, 30% terminal margin
Key Value Driver
Revenue growth (30%) × margin expansion to 26%
Terminal Value % of EV
57%
Implied Market Multiple
26.2x
Summary
Our base-case estimate uses a discounted cash flow model based on revenue growth and long-run free cash flow margins. We then blend that result with the average analyst price target of $231.21 from 48 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $148.88 per share.
Warnings
Stock-based employee pay is 22% of revenue — your ownership shrinks by about 2.0% each year as new shares are issued. Our estimate already accounts for this dilution.
Gross margin of 80% means each dollar of revenue is highly profitable. As the company grows, overhead costs should shrink as a share of revenue, boosting overall profits.
Wall Street's average price target is $231.21 (from 48 analysts). Our estimate is 51% below the consensus -- consider that gap carefully.
Key Risks
- Current FCF misleads — the model values future margins, not today's cash
- SBC dilution is the hidden tax: 2-4% annual share growth compounds fast
- Revenue deceleration is inevitable — the question is when and how steep