(Barron’s) – Shares of both Splunk and Dynatrace are getting a boost on Friday from bullish calls by Baird analyst Jonathan Ruykhaver. He also picked up coverage—but less enthusiastically—of Datadog and Elastic.
What the four stocks have in common is they all provide data on how IT systems are running—a concept that enterprise software experts call “observability.” In fact, Ryukhaver uses the word “observability” in all four of his research notes today, and refers to his move today as “our newly launched observability coverage.”
Here’s a rundown on his four calls.
Splunk (ticker: SPLK): Ruykhaver assumes coverage from another analyst, and boosts the firm’s rating on the data analytics company to Outperform from Neutral, with a new target price of $240, up from $220. He cites the company’s cloud momentum, leadership in security, and investment in IT operations and observability. “We look at Splunk’s strong growth in ARR (annual recurring revenue) as indicative of strong underlying business fundamentals despite the model noise and appreciate the moves the company has made to invest in its cloud offering,” he writes.
Dynatrace (DT): The analyst launches coverage with an Outperform rating and a $50 price target. “Dynatrace offers a SaaS [software as a service] platform addressing observability use cases,” he writes. “We appreciate Dynatrace’s ability to provide insights across the stack and believe its focus on complex, enterprise cloud architectures positions the company for continued momentum.”
Datadog (DDOG): Ruykhaver picks up coverage with a Neutral rating—saying its high valuation compared with SaaS peers gives him pause—and $92 target price. “Datadog offers a cloud-native, SaaS platform primarily addressing observability,” he writes. “The company is well-positioned to benefit from a continued move toward the cloud.”
Elastic (ESTC): He launches coverage with a Neutral rating at $120 price target. Ruykhaver notes the company offers tools for search, security and observability. “We like the product story for Elastic but look to see improved large customer growth to help validate the long-term opportunity.”
In Friday trading, both Splunk and Dynatrace have rallied about 4%, while Datadog and Elastic are both up a little less than 1%.