The tech-focused Nasdaq-100 is home to some of the most innovative and fastest-growing companies around. As of May 14, most of the stocks in the index are up year to date. But some of them still offer attractive long-term growth prospects and are trading well off their recent highs, including Datadog(NASDAQ: DDOG) and The Trade Desk(NASDAQ: TTD).
Datadog shares are currently down 17% year to date, while The Trade Desk shares are down 34.5%. However, these growth stocks jumped off their recent lows following strong earnings reports. Is it time to buy them?
Image source: Getty Images.
Datadog is seeing high demand for its AI monitoring tools
Datadog offers software that helps businesses monitor their information technology systems. The growing adoption of cloud computing and artificial intelligence (AI) is fueling demand for Datadog's cloud observability tools.
The stock fell earlier this year over concerns that software spending might come under pressure if tariffs send the economy into a recession. However, Datadog's first-quarter report suggests those fears might be overblown, as the company's revenue grew 25% year over year to $762 million in the first quarter.
Other than normal fluctuation in its business from quarter to quarter, demand from large enterprises remains healthy. Datadog is seeing particularly high demand for its AI monitoring tools, which could position the business for tremendous growth as companies continue to pour investment into the AI market.
Datadog signed 11 deals in the quarter with a contract value of at least $10 million. These new deals are on top of continued spending from existing customers, indicating how crucial Datadog's software is for these businesses.
The cloud observability market is very competitive, but Datadog's advantage stems from its cloud agnostic position. It helps businesses that are using multiple cloud services. This is valuable to companies that want flexibility and don't want to be tied down to a single provider for their technology infrastructure needs.
The stock has surged higher since the earnings report, and it still looks like a great long-term investment opportunity. Datadog's trailing revenue is just $2.8 billion, but it's serving a market expected to reach $81 billion by 2028, according to Gartner. The stock is still trading over 50% below its 52-week high, making the dip a good buying opportunity.
Image source: Getty Images.
2. The Trade Desk
The Trade Desk is a leading digital ad-buying platform that has delivered tremendous growth for shareholders. It is going after a huge opportunity as more advertisers seek to invest in digital ads across the open internet, or outside the "walled gardens" of Alphabet's Google Search and other ad-driven platforms controlled by tech giants.
The stock lost about half its value earlier this year after its financial results for Q4 2024 came in lower than Wall Street's expectations. Keep in mind, the stock was also expensive heading into the year, trading at high multiples of revenue and earnings.
There might also have been concerns about a potential slowdown in the ad market due to uncertainty over the economy. But the company's first-quarter results seemed to put those concerns to rest. Revenue grew 25% year over year in Q1, only a few percentage points lower than last year's growth. Ad spending on its platform appears healthy, and the stock is responding, up 29% since the earnings report on May 8.
The Trade Desk is demonstrating leadership in the $1 trillion ad market with strong adoption of its Unified ID 2.0. This replaces third-party cookies on the internet with a unique identifier that allows advertisers to measure ad performance without violating user privacy. It's also in the process of moving clients over to its AI-powered Kokai platform that can significantly improve returns on ad spending.
Investors should consider taking advantage of the stock's recent dip. From a valuation perspective, this ad-tech stock is more attractive than it was earlier this year, when it was trading at over 80 times 2025 earnings estimates. At the current forward price-to-earnings ratio of 44, investors are getting more value for their money.
Analysts expect the company's earnings to grow at an annualized rate of 31% in the coming years. The Trade Desk is only capturing a small percentage of its addressable market and should deliver market-beating returns for long-term investors.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Datadog, and The Trade Desk. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.
