Datadog Stock Rallied 23% – Have You Assessed the Risk
Datadog (DDOG) stock is up 23.1% in a day. Already own the stock or planning to buy? You might want to re-consider based on the valuation as the stock now looks expensive. Consider the following data:
- Size: Datadog is a $66 Bil company with $3.0 Bil in revenue currently trading at $190.82.
- Fundamentals: Last 12 month revenue growth of 26.0% and operating margin of -0.6%.
- Liquidity: Has Debt to Equity ratio of 0.02 and Cash to Assets ratio of 0.67
- Valuation: Datadog stock is currently trading at P/E multiple of 530.3 and P/EBIT multiple of 422.5
- Has returned (median) 51.9% within a year following sharp dips since 2010. See DDOG Dip Buy Analysis.
While we like to ride the momentum if the fundamentals check out – for DDOG, see Buy or Sell DDOG Stock – we are wary of bull traps. Specifically, it is worth trying to answer if things get really bad, and DDOG drops 20-30% to $134 levels, will we be able to hold on to the stock? What is the worst case scenario? We call it downturn resilience. Turns out, the stock has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.
A single stock can be risky, but there is a huge value to a broader, diversified approach. Strategic asset allocation and diversification help you stay invested. Did you know investors who panicked out of the S&P in 2020 lost significant upside that followed? Trefis High Quality Portfolio and Empirical Asset Management’s asset allocation approach are designed to reduce volatility so you can stay the course.
Below are the details, but before that, as a quick background: DDOG provides a SaaS platform that integrates and automates infrastructure, application performance, log, and security monitoring for developers, operations, and business users globally.
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2022 Inflation Shock
- DDOG stock fell 68.1% from a high of $196.56 on 9 November 2021 to $62.69 on 25 April 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- The stock is yet to recover to its pre-Crisis high
- The highest the stock has reached since then is $190.82 on 6 November 2025 $190.82
| DDOG | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -68.1% | -25.4% |
| Time to Full Recovery | Not Fully Recovered | 464 days |
2020 Covid Pandemic
- DDOG stock fell 42.1% from a high of $50.01 on 12 February 2020 to $28.96 on 16 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 8 May 2020
| DDOG | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -42.1% | -33.9% |
| Time to Full Recovery | 53 days | 148 days |
It is a good thing to keep in mind how low DDOG could go during a downturn. And you should also check how the stock fared when compared with the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 — the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.