Datadog Inc. (NASDAQ: DDOG), the leading monitoring and security platform for cloud applications, has reported impressive second-quarter earnings that exceed market expectations, prompting investors to reassess the stock’s potential.

On Thursday, Datadog announced a Non-GAAP EPS of $0.43 for Q2 2024, surpassing analysts’ forecasts by $0.07.

Additionally, the company achieved revenue of $645 million, marking a robust 26.7% increase year-over-year and exceeding predictions by $19.9 million.

The company’s solid performance highlights its operational efficiency, with operating cash flow reaching $164 million and free cash flow at $144 million.

This strong financial showing led to a notable 9% increase in Datadog’s stock price at market open today.

Datadog’s financial stability is underscored by its liquidity, with cash, cash equivalents, and marketable securities totaling $3.0 billion as of June 30, 2024.

The company also saw its customer base with Annual Recurring Revenue (ARR) of $100,000 or more grow by 13% year-over-year to approximately 3,390 customers.

Ambitious targets

Looking ahead, Datadog has set ambitious targets for the upcoming quarters. For Q3 2024, the company projects revenues between $660 million and $664 million and expects a Non-GAAP net income per share between $0.38 and $0.40.

For the full year, Datadog anticipates revenues in the range of $2.62 billion to $2.63 billion, with non-GAAP operating income expected between $620 million and $630 million.

These projections surpass the company’s previous forecasts shared during the Q1 earnings release.

CEO Olivier Pomel credited the quarter’s success to exceptional execution and the expanding adoption of Datadog’s multi-product platform.

The company’s commitment to innovation was showcased at the DASH 2024 user conference, where new products like Agentless Scanning, Data Security, and Code Security were introduced.

These enhancements strengthen Datadog’s security offerings and reinforce its leadership in cloud monitoring.

The launch of the Live Debugger tool, along with the general availability of LLM Observability and Kubernetes Autoscaling solutions, has further solidified Datadog’s market position as a frontrunner in cloud monitoring.

key appointments in the leadership team

Datadog has also bolstered its leadership team with key appointments.

Yanbing Li has been appointed Chief Product Officer, bringing valuable experience from Google, while David Galloreese joins as Chief People Officer, bringing a wealth of expertise from Walmart.

Datadog’s integrated platform offers a comprehensive suite of monitoring and security solutions, differentiating it from competitors like New Relic and Dynatrace.

This unique positioning enables Datadog to capture a larger share of the growing demand for cloud-based monitoring.

However, the competitive landscape in the technology sector demands continuous innovation and adaptation.

Datadog’s ability to stay ahead of technological shifts and meet evolving customer expectations will be critical to sustaining its growth trajectory.

Valuation

In terms of valuation, Datadog’s forward price-to-earnings (P/E) ratio, based on the upper end of its EPS guidance ($1.66 for FY24), reflects a premium compared to the industry average, signaling strong investor confidence.

However, the company’s price-to-sales (P/S) ratio, considering current revenue forecasts, suggests a premium valuation relative to historical averages.

As we analyze Datadog’s stock performance, it will be crucial to monitor whether the current price trajectory aligns with its robust fundamentals.

Following a surge in stock price after its IPO in September 2020, Datadog’s stock peaked near $200 in November 2021 before a significant decline, reaching lows near $62 early last year.

The recent Q2 results could signal a potential turning point, making Datadog an intriguing stock to watch for both long-term and short-term investors.

Resistance above $138 is a big hurdle

Although the stock has doubled since then, it has faced significant resistance trading above $138 since the start of 2024. Another thing to note is that the stock’s 100-day moving average is on the verge of crossing below its 200-day moving average, which is a potential signal for a long-term downtrend.

DDOG chart by TradingView
Hence, investors, bullish on the stock but haven’t bought it yet, must tread with caution and not initiate a significant long position until the stock closes above $138 on the daily charts. They can accumulate the stock at current levels but must keep a strict loss below the short-term swing Low at $98.80.

Traders who are bearish on the stock may use today’s bounce for a fresh shorting opportunity.

If the stock gives up today’s gain in the coming days, that will indicate bearish momentum is going to persist in the medium term and the stock might once again fall back to below $100, where one can book profits on short positions.

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Bill Ackman’s Pershing Square Capital Management is exploring a major acquisition, targeting Howard Hughes Holdings Inc (NYSE: HHH) with plans to take the real estate firm private.

Ackman aims to acquire the remaining 62% of Howard Hughes that Pershing Square does not currently own.

The valuation of this potential deal remains undisclosed, but the news has already had a positive effect on Howard Hughes’ stock, which has risen nearly 5% this morning.

Howard Hughes has experienced a challenging year

The move comes at a pivotal moment for both Pershing Square and Howard Hughes.

The latter has experienced a challenging year, with its stock dropping more than 18% before the announcement.

In contrast, the S&P 500 index has gained approximately 9% over the same period.

The real estate firm, named after the legendary business magnate Howard Hughes, has been struggling in 2024, which may have spurred interest from Ackman and his team.

Howard Hughes Holdings has responded to the offer by forming a special committee to explore “various potential alternatives,” indicating that the board is taking Pershing Square’s proposal seriously.

The shift to private ownership could allow Howard Hughes to make long-term strategic decisions away from the pressures of the public markets, potentially positioning the company for future growth.

Why is Pershing Square interested in Howard Hughes?

Pershing Square’s interest in Howard Hughes follows its recent decision to cancel plans for an initial public offering (IPO), a move that has generated considerable speculation.

By acquiring Howard Hughes, Pershing Square would gain control over a substantial real estate portfolio, which could significantly impact the firm’s strategic direction and market presence.

The capital management company has engaged Jefferies as its advisor for the potential acquisition, signaling a serious commitment to the deal.

Howard Hughes, which emerged from General Growth Properties after its bankruptcy during the 2008 financial crisis, recently restructured to focus solely on real estate.

Last month, it spun off its Las Vegas Aviators baseball franchise and South Street Seaport, streamlining its operations.

In its latest fiscal Q2 report, Howard Hughes exceeded analysts’ expectations.

The company’s CEO, David R. O’Reilly, expressed optimism about future demand for new acreage from homebuilders, suggesting a positive outlook for the real estate market.

This sentiment is reflected in the consensus “buy” rating from Wall Street analysts, who project an average price target of $84 for Howard Hughes’ stock, indicating potential for a more than 20% gain.

The prospective acquisition by Pershing Square could reshape Howard Hughes Holdings’ future, providing the company with new opportunities for growth and development.

As the market reacts to these developments, investors will be keenly watching how the deal unfolds and what it means for the broader real estate sector.

With the acquisition potentially bringing significant changes to Howard Hughes, stakeholders are advised to stay informed about further updates and strategic shifts.

The evolution of this deal will be crucial in understanding its impact on both companies and the real estate market at large.

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Renowned investor Jim Cramer is optimistic about Robinhood’s future, predicting further gains for the stock in the coming days.

Despite a modest rise in Robinhood Markets Inc.’s stock price on Thursday, the company’s recent earnings report exceeded Wall Street’s expectations for Q2. 

Robinhood Q2 earnings report 

Robinhood’s second-quarter performance showcased a robust 69% year-over-year growth in transaction-based revenue, driven by increased trading in both stocks and cryptocurrencies. 

The resurgence of the meme stock phenomenon also contributed to the firm’s impressive quarterly results.

Cramer, speaking on CNBC’s “Squawk on the Street,” highlighted Robinhood CEO Vladimir Tenev’s innovative approach, which he believes sets the company apart from other brokerage firms. 

Tenev’s initiatives, such as offering margin trading and enhancements to individual retirement accounts (IRAs), are viewed as key factors in Robinhood’s potential for growth.

Why Jim Cramer is bullish on Robinhood

Cramer’s confidence in Robinhood’s stock stems from several factors. 

The company’s expansion into new financial products, including margin trading and an AI-driven investment advisor, demonstrates its commitment to meet evolving market demands. 

Although Cramer expressed some reservations about the AI assistant, he acknowledged its appeal to the company’s user base.

Additionally, Wall Street analysts share Cramer’s enthusiasm. 

The average price target for Robinhood’s stock is $23, suggesting a potential upside of approximately 35% from its current level. 

However, it is worth noting that Robinhood’s lack of dividend payments makes it less attractive to income-focused investors.

Robinhood’s growing subscriber base 

Robinhood’s recent growth is also evident in its subscription service. 

The company reported over 2 million Gold subscribers, marking a substantial 61% increase year-over-year. 

This growth underscores Robinhood’s success in attracting and retaining customers, particularly among younger investors.

The firm’s diverse offerings, including a significant presence in the options and cryptocurrency markets, contribute to its strong market position. 

Cramer praised Robinhood for its ability to cater to various trading interests, noting the platform’s appeal to both casual and active traders.

Leadership changes and strategic moves

Robinhood’s strategic initiatives are further supported by recent leadership changes. 

The company recently appointed David Schwed as the Chief Information Security Officer for its brokerage division. 

Schwed brings extensive experience in cybersecurity, having previously served as COO at Halborn, a web3 and blockchain security solutions company based in Miami. 

This appointment is expected to bolster Robinhood’s security measures and enhance user confidence.

As Robinhood continues to expand its product offerings and enhance its platform, it is well-positioned for future gains. 

Investors and analysts alike are closely watching the stock, with expectations of significant upside potential despite the lack of dividend yields.

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The Competition and Markets Authority (CMA) has launched a formal investigation into Amazon’s multibillion-dollar investment in the US artificial intelligence firm Anthropic.

The probe aims to determine whether the partnership could potentially harm competition in the UK. The CMA announced on Thursday that it has initiated a “Phase 1” investigation to assess if the Amazon-Anthropic deal constitutes a relevant merger situation that may negatively impact the competitive landscape.

Initial findings prompt formal investigation

Following preliminary scrutiny, the CMA concluded that it has gathered sufficient information to commence a formal inquiry into the Amazon-Anthropic alliance. The regulator’s notice on its website indicates that it now has up to 40 working days to decide whether the transaction warrants a deeper, “Phase 2” investigation.

This step will determine if the deal could indeed harm competition and, if so, what measures might be necessary to mitigate such effects.

Details of Amazon’s investment in Anthropic

Amazon completed its $4 billion investment in Anthropic in March. The deal, finalised over two stages, included an initial $1.25 billion equity stake acquired in September, followed by an additional $2.75 billion transaction earlier this year.

As part of the agreement, Anthropic’s advanced large language models will be integrated into Amazon’s Bedrock platform, which is used for developing generative AI applications. These models will be trained and deployed on Amazon’s custom AI chips, developed by its Amazon Web Services (AWS) cloud computing division.

Amazon and Anthropic’s responses to the investigation

In response to the CMA’s decision to proceed with an initial Phase 1 merger probe, an Amazon spokesperson expressed disappointment. The spokesperson emphasised that the collaboration with Anthropic does not raise any competition concerns or meet the CMA’s threshold for review.

Amazon highlighted its role in expanding choice and competition within the technology sector through its investment in Anthropic. They also noted that Amazon holds no board seat or decision-making power at Anthropic, which retains the freedom to partner with other providers.

Anthropic echoed Amazon’s sentiments, reaffirming its independence as a company. An Anthropic spokesperson stated that the firm’s strategic partnerships and investor relationships do not compromise its corporate governance or freedom to collaborate with others.

The spokesperson welcomed the opportunity to cooperate with the CMA and provide a comprehensive understanding of Amazon’s investment and their commercial collaboration.

Broader context of regulatory scrutiny

The Amazon-Anthropic partnership is not the only deal under the CMA’s scrutiny. The regulator is also examining the multibillion-dollar partnership between US software giant Microsoft and AI leader OpenAI. The CMA has yet to announce whether it will launch a Phase 1 investigation into the Microsoft-OpenAI deal.

In the United States, the Federal Trade Commission (FTC) has also shown interest in recent investments and partnerships within the tech sector. In January, the FTC issued orders to major technology companies, including Microsoft, Amazon, and Google, as well as AI firms like OpenAI and Anthropic, requiring them to disclose information about their recent collaborations and investments.

This move underscores a growing regulatory focus on the implications of significant investments and partnerships in the rapidly evolving field of artificial intelligence.

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Super Micro Computer Inc. (NASDAQ: SMCI) saw its stock drop by 20% today following its Q4 earnings report.

Despite announcing a better-than-expected forecast and a forthcoming 10-for-1 stock split effective October 1st, the market reaction was overwhelmingly negative.

Delay in Nvidia’s Balckwell GPUs

On the company’s earnings call, CEO Charles Liang mentioned that he did not expect any meaningful shipment of the Nvidia Blackwell GPUs until the start of the second quarter of 2025.

For Q4, I mean December quarter, I guess, it will be very small. Engineering sample small volume. So the real volume, I believe, had to be March quarter next year. And that’s why we foresee only $26 billion to $30 billion.

Charles Liang

Companies like Microsoft and Google have already confirmed the delays in their earnings reports. So even when Nvidia CEO is claiming many of the shipments will be handled by the end of this year, the customers are possibly giving a truer picture.

When companies discover a design flaw so late in the manufacturing process like Nvidia did, it usually isn’t good news.

Semiconductor manufacturing is a complicated process and Nvidia and Taiwan Semiconductor will have a lot of work to do to fix the flaws. However, considering Nvidia doesn’t have any great competition, a few months’ delay doesn’t affect the company.

It does, however, affect a company like Super Micro Computer, which has given conservative guidance as it doesn’t see much impact of the Blackwell GPUs on its liquid cooling racks sales until the last quarter of FY2025, which ends in June 2025.

Having said that, the forecasted revenue is already factoring in an 87% YoY growth, which is impressive. What’s even more impressive is that this is on top of the 110% revenue growth in FY2024.

What are the analysts saying?

The stock received a downgrade from BofA who assigned it a rating of Neutral from the previous Buy rating. The analysts at the firm expect the company’s margins to stay depressed despite the expectation of strong revenues.

However, the fact that analysts agree with the company’s forecast of increasing revenues shows that the AI industry is still expected to remain strong. This could bode well for stocks that cater to AI infrastructure.

Wells Fargo maintained an equal weight rating with a price target of $650. The firm believes that the increase in revenue offsets the reduction in margins, bringing neither any overall benefit nor causing any great concern.

J.P. Morgan’s team of analysts led by Samik Chatterjee maintained their overweight rating and the price target of $950. They believe the company’s lackluster margins were already priced in.

The stock was last trading at $492, which comes out as a 48% discount to J.P. Morgan’s price target.

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In a recent survey, nearly half of student loan borrowers are optimistic about future forgiveness of their debts. 

The “How America Pays for College” report by Sallie Mae reveals that 48% of borrowers expect the government to excuse their education loans. 

This annual report, conducted between April 8 and May 14 by global market research company Ipsos, gathered insights from 1,000 undergraduate students and 1,000 parents of undergraduate students.

Despite the widespread optimism, consumer advocates caution against making borrowing decisions based on the assumption that debts will be canceled.

This warning follows the Supreme Court’s rejection of President Joe Biden’s plan to forgive up to $20,000 in student debt per borrower last summer, affecting tens of millions of borrowers who did not receive the anticipated relief.

Upcoming election introduces further uncertainty 

The upcoming presidential election introduces further uncertainty regarding existing student loan forgiveness programs. 

During his tenure, former President Donald Trump called for scrapping the US Department of Education’s loan relief programs, including the widely-utilized Public Service Loan Forgiveness (PSLF) initiative. 

This program benefits public employees such as members of the U.S. armed forces, first responders, public defenders, prosecutors, and teachers. 

Trump aimed to reduce the department’s budget and halted a regulation designed for loan forgiveness to students defrauded by their schools.

On the other hand, President Joe Biden’s administration has introduced a new affordable repayment plan known as SAVE, which aims to expedite forgiveness for many borrowers. 

This initiative is currently on hold due to a series of legal challenges.

Alternative strategies for managing education costs

“Borrowing for college makes sense for some families, but it’s critical to have a plan and do so responsibly,” said Rick Castellano, vice president of Sallie Mae, in a statement.

With the future of student loan forgiveness uncertain, families are encouraged to explore alternative strategies to manage education costs.

These strategies include seeking scholarships, grants, and work-study opportunities, as well as considering community colleges or in-state universities to reduce tuition expenses. 

Additionally, creating a detailed budget and financial plan can help families avoid excessive borrowing and manage their education-related expenses more effectively.

Student loan debt continues to be a significant issue in the United States, with borrowers collectively owing over $1.7 trillion. 

This debt burden has widespread implications, affecting borrowers’ ability to purchase homes, start businesses, and save for retirement. 

As such, the debate over student loan forgiveness and repayment policies remains a critical topic in national discussions.

As the debate over student loan forgiveness continues, it is essential for borrowers to stay informed about potential policy changes and to approach borrowing with caution. 

By considering alternative strategies and maintaining a responsible approach to borrowing, families can better manage their education-related expenses and avoid the pitfalls of excessive debt.

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The UK economy has emerged from the Covid-19 pandemic in a stronger state than previously thought, according to revised data from the Office for National Statistics (ONS).

The new estimates show that the annual volume GDP growth for 2022 is now 4.8%, up from the earlier estimate of 4.3%.

Small revisions for 2020 and 2021 reflect economic adjustments

The ONS update, released on Wednesday, also includes minor revisions of 0.1 percentage points to GDP growth estimates for 2021 and 2020, with figures for earlier years remaining unchanged.

These adjustments reflect a more accurate representation of economic activity, considering the full administrative and survey data now available to the ONS.

Stronger growth in key sectors drives GDP revision

The upgraded estimate for 2022, a year marked by high inflation and market turmoil following Liz Truss’s “mini” Budget, is partly attributed to stronger growth in the transport, professional, and business support industries.

The ONS’s fuller dataset has provided a clearer picture of these sectors’ contributions to the economy.

Moreover, the revised figures account for the changing economic structure post-pandemic. The health sector, which saw an increased share of the economy during the pandemic, remained larger in 2022 as the NHS worked to address care backlogs.

Similarly, the energy sector’s share of economic activity grew due to the surge in global oil and gas prices following Russia’s invasion of Ukraine.

Hospitality and manufacturing sectors remain impacted

Conversely, the hospitality sector, heavily affected by Covid-19 lockdowns, continues to be smaller than its pre-pandemic size.

The manufacturing sector’s share of output also declined, impacted by high energy prices.

The ONS also revised its assessment of the rail and air transport sectors during the pandemic.

The rail industry, which received government subsidies to maintain operations, was found to be a larger drag on growth in 2020 and 2021 than previously thought, as airlines largely ceased operations.

Annual revisions less dramatic than previous years

This year’s revisions by the ONS are less dramatic than those in the past two years.

Last year, the agency’s revisions led to a significant reappraisal of the UK’s economic performance during the pandemic, showing the economy to be more resilient and less of an international outlier than initially assumed.

The latest figures reinforce this revised perspective, indicating that the cumulative GDP growth from 2020 to 2022 was 2.1%, higher than the previous estimate of 1.9%.

UK recovery among G7 peers

Simon French, chief economist at the investment bank Panmure Liberum, commented that the UK’s recovery from the Covid crisis is now “increasingly looking middle of the pack among its G7 peers.”

However, he noted that this upgrade is unlikely to impact the UK fiscal outlook, which is based on more recent borrowing figures, or influence interest rate decisions by the Bank of England, which focuses on the current growth trajectory.

Challenges of economic estimation during the pandemic

The ONS has faced criticism for the scale of its reassessments, particularly last year. The agency acknowledged that recent revisions reflect the widespread challenges of economic estimation during the pandemic and recovery periods.

Craig McLaren, head of national accounts at the ONS, explained that the agency usually updates the “weight” it gives to each industry within GDP annually but had to pause this process when much of the economy was either closed or operating differently than usual.

The first update to these weights since 2019 had a notable impact due to the significant changes in economic operations resulting from both the pandemic and the effects of Russia’s invasion of Ukraine.

In September, the ONS will publish figures bringing its 2023 and 2024 GDP estimates in line with the updated and reweighted data, providing a clearer view of the ongoing economic recovery.

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