Datadog (DDOG)
The stock fell 18% in early trading, then sat around 17% down. This came even after a solid quarter. Year to date it was still up about 70%.
Adjusted earnings per share came in at 65 cents, beating the 59-cent estimate. Revenue hit $1.12 billion, above the $1.08 billion Wall Street expected. Cash flow stayed strong: operating cash flow of $360 million and free cash flow of $279 million. The company ended the quarter with about 4,720 large enterprise customers, each bringing in yearly recurring revenue over $100,000, up 23% from a year earlier. Targets were raised.
So why the drop? Likely profit taking. The stock hit a fresh all-time closing high earlier in the week after a strong run. Evercore ISI analysts called the initial reaction a bit extreme given the solid Q2 results. Analysts also flagged very stretched valuations going into the report. It is a volatile stretch for tech, especially software. OpenAI is a customer, along with Amazon Web Services. Sales jumped and the outlook was lifted, but with the stock up over 100% this year, some of the selling looks like profit taking.
AppLovin (APP)
The stock dropped nearly 20% early, settling around 16.5% lower, off a mixed report. Adjusted EPS was $3.76, beating the $3.72 estimate. Revenue slightly missed at $1.92 billion versus $1.94 billion expected. The company reported the night before, so sellside reaction had time to build.
Price targets got cut across the board:
- BofA: to $430 from $705. It said the consumer segment is no longer a major part of its bull case, but it kept a buy rating on the strength of the gaming model.
- BTIG: to $574, lowered, kept buy.
- Goldman Sachs: to $465, kept neutral, staying on the sidelines.
- Piper Sandler: to $385 from $665, a downgrade to neutral from overweight.
- UBS: to $790, down, kept buy.
- Wells Fargo: downgraded to equal weight from overweight, target $357 from $575.
Most moves look like a rerating rather than a turn bearish, though a couple were real downgrades. Many analysts are taking a wait-and-see stance. The market wanted more clarity on the AI side, especially enterprise. There is an interesting shift underway from gaming into AI and e-commerce, plus work around Axon.
The stock has fallen from a 52-week high of $745 last September and October down to about $338, sitting near its 52-week low around $344. Year to date it is down 40% with this morning's move. What stands out: even after the cuts, targets cluster at $400, $500, $600, with RBC as high as $700. No one set a target near $345, so all the analysts are lowering targets that still sit far above the current price. The targets are also scattered, from Piper's $385 up to UBS's $790, a wide split.
Celsius (CELH)
A double miss. EPS came in at 36 cents versus 42 expected. Revenue was $817.93 million against the $870 million the street looked for. Gross margin shrank to 48.1% from 51.5%. Operating margin collapsed to 9.2% from 19.3%, a sharp margin squeeze that is likely part of the worry.
The main problem is the core Celsius brand, which fell 11.7% year over year, even though the drink is everywhere and many people have swapped coffee for it. Alani Nu is holding up and driving growth, with $364.4 million in Q2 sales, a real bump. Management blamed the weakness on several things: more trade promotions, spending on distribution incentives, rebalancing inventory, its PepsiCo distribution setup, and general softness in the retail channel.
