Datadog is a strong company at an attractive entry point following a recent pullback, according to TD Cowen. Analyst Andrew Sherman initiated coverage of the software stock at outperform. His $120 price target implies shares could rally 32.9% in the next year. “We think DDOG is a rare breed given its platform breadth, R & D engine, GTM approach, and mgmt team,” he said in a note to clients Thursday, using acronyms for research and development and go-to-market. “Our checks were highly bullish and we think DDOG is in the best position to consolidate spend from other tools.” Sherman said the company, which went public in 2019, is no longer just a “cute puppy,” noting users of a wide range of applications indirectly rely on Datadog to keep them running smoothly. His conversations with users found its breadth, as well as the speed and ease of implementations, can differentiate the platform from competitors. The company beat the expectations of analysts polled by FactSet when reporting second-quarter earnings last week. But underwhelming revenue guidance for the current quarter and full year has pushed the stock down around 15% since the report, he noted. Shares are down 22.6% in August. Despite the weak estimates, the analyst called the full-year outlook de-risked and pointed to positives such as usage improvement in July and a stabilization of the oldest group of optimizers. He also said the company has long-term growth drivers including new net adds and use cases. In addition, he said Datadog has a “best-in-class” management team that has “perfected” the company’s strategy around research and development and mergers and acquisitions. At this point, he said the stock is at a highly attractive entry point, especially as investors begin to look to performance in 2025. Shares are still up about 22.8% in 2023 after the post-earnings slide. By comparison, the technology-heavy Nasdaq Composite has 27.7% in the same period. DDOG .IXIC YTD mountain Datadog vs. the Nasdaq Composite, year to date — CNBC’s Michael Bloom contributed to this report