BofA crowns monitoring platform top software pick before earnings

Bank of America (BAC) conscionable told clients which bundle banal it wants to ain going into net season.

The prime is Datadog (DDOG), the unreality monitoring institution that reports second-quarter results connected August 6.

BofA named Datadog its top bundle pick and kept its Buy rating.

That telephone matters due to the fact that Datadog is not a inexpensive stock, and the slope is asking investors to wage up close earlier a study that could spell either way.

Here is what BofA sees, and what inactive has to hap for the banal to reward the radical buying it now.

Why Bank of America picked Datadog earlier its Q2 net

Datadog sells observability software, which is the tooling companies usage to ticker whether their apps and unreality systems are moving correctly.

When a website slows down oregon an app breaks, observability tools are what engineers usage to find the problem.

BofA's assurance comes from a signifier it recovered successful Datadog's data. 

The slope studied however Datadog's gross maturation has tracked Amazon Web Services show implicit time, and its existent second-quarter estimation looks debased against that history.

In plain terms, the slope thinks Wall Street's fig for the 4th whitethorn beryllium excessively conservative.

BofA besides flagged 3 things supporting the call: steadfast request signals, steadier trends astir ample lawsuit renewals, and stronger positioning successful monitoring AI systems.

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The AI space is the newest portion of the argument.

As companies manus much enactment to autonomous AI agents, they request a mode to ticker what those agents bash erstwhile thing goes wrong. BofA argues that Datadog is acceptable up to merchantability precisely that benignant of monitoring.

Bank of America named Datadog its apical bundle prime up of the company's second-quarter net report.SOPA Images / Getty Images

What Datadog's numbers person to amusement connected August 6

Analysts expect net of astir $0.58 per share connected gross of roughly $1.08 billion, according to Ticker Report. 

Datadog's ain guidance calls for gross between $1.07 cardinal and $1.08 billion.

For context, gross grew 32% year-over-year successful the archetypal quarter, and absorption raised its full-year outlook aft that report.

The marketplace has already priced successful a batch of bully news.

Datadog shares closed astatine $267.97 connected July 31, up about 108% implicit the anterior six months. The banal trades adjacent its 52-week precocious of $278.76, good supra its low of $98.01.

That tally is the risk. A banal priced for beardown results has little country to sorb a anemic 4th report.

Datadog has beaten Wall Street's net expectations successful each of the past 4 quarters, which is portion of wherefore the barroom is acceptable precocious going in.