By Sam Boughedda
In a research note Wednesday, a Baird analyst assumed coverage of Datadog, Inc. (NASDAQ:DDOG) and Dynatrace Inc. (NYSE:DT) with an Outperform rating.
The analyst set Datadog's price target at $120 per share, while Dynatrace's price target was set at $49.
Baird is positive on observability and data analytics growth and believes Datadog and Dynatrace are two of the observability platform leaders.
"While the macro-economic climate presents ongoing risks, we expect digital transformation and cloud adoption trends to continue to benefit both long term," explained the analyst.
On Datadog, he said that the company has "established itself as the cloud-native observability platform leader" with leading growth and strong cash flow.
Meanwhile, for Dynatrace, he commented it generates "strong growth with enterprise and AI differentiation coupled with industry-leading profitability," while it also continues to expand its platform capabilities.
However, Baird acknowledges that there are headwinds, such as stiff competition, macro impacts and FX exposure, that could pose risks.