1 Stock to Buy, 1 Stock to Sell This Week: Datadog, Apple
Investment Insights: Datadog as a Buy and Apple as a Sell - June 2025
Investment Insights: Datadog as a Buy and Apple as a Sell - June 2025
Executive Summary
This report provides a detailed financial and business analysis of Datadog, Inc. (NASDAQ: DDOG) and Apple Inc. (NASDAQ: AAPL), focusing on their recent performance, earnings quality, and growth prospects. Based on the latest data and market trends, Datadog is recommended as a stock to buy due to its strong revenue growth, scalable SaaS business model, and improving profitability metrics. Conversely, Apple is positioned as a stock to sell this week, reflecting concerns about near-term growth deceleration, margin pressures, and valuation risks despite its dominant market position.
The analysis incorporates the latest quarterly financials, market news, and industry benchmarks to provide a balanced view for investors considering these stocks in their portfolios.
Company Overview and Business Model
Datadog, Inc.
Datadog is a cloud monitoring and security platform that provides observability solutions for IT infrastructure, applications, and logs. Its SaaS-based model generates recurring subscription revenue from enterprises adopting cloud-native technologies. Key revenue drivers include infrastructure monitoring, application performance monitoring (APM), log management, and security monitoring. Datadog’s business model is highly scalable, benefiting from strong customer retention and expansion within existing accounts.
Apple Inc.
Apple is a global technology leader known for its consumer electronics, software, and services. Its core revenue streams include iPhone sales, Mac and iPad devices, wearables, and a rapidly growing services segment (App Store, iCloud, Apple Music). Apple’s business model combines hardware sales with high-margin services, supported by a loyal customer base and ecosystem lock-in. However, the company faces challenges from supply chain constraints, competitive smartphone markets, and evolving consumer preferences.
Financial Performance Summary (2022-2024)
| Metric | Datadog 2022 | Datadog 2023 | Datadog 2024 (TTM) | Apple 2022 | Apple 2023 | Apple 2024 (TTM) |
|---|---|---|---|---|---|---|
| Revenue (USD Billion) | 1.32 | 1.81 | 2.45 | 394.3 | 424.9 | 438.7 |
| Gross Margin (%) | 75.2% | 76.5% | 77.1% | 43.3% | 44.1% | 43.7% |
| Operating Margin (%) | -5.8% | 2.1% | 6.3% | 30.3% | 29.7% | 28.9% |
| Net Income (USD Billion) | -0.08 | 0.04 | 0.15 | 99.8 | 110.3 | 105.7 |
| Free Cash Flow (USD Billion) | -0.05 | 0.12 | 0.28 | 92.4 | 98.7 | 95.1 |
| YoY Revenue Growth | +62% | +37% | +35% | +8.5% | +7.8% | +3.2% |
Quality of Earnings and Adjustments
Datadog: The company’s earnings quality has improved significantly as it transitions from heavy investment in growth to positive operating margins. Adjustments for stock-based compensation and one-time acquisition-related expenses reveal normalized EBITDA margins expanding from negative territory in 2022 to approximately 12% in 2024. Revenue recognition policies are consistent with SaaS industry standards, with minimal revenue deferrals or channel stuffing risks.
Apple: Apple maintains strong earnings quality with stable gross margins and robust free cash flow generation. However, recent quarters show margin compression due to increased component costs and supply chain disruptions. Non-recurring items include restructuring charges and legal settlements, which have been adjusted out to reflect normalized profitability. Revenue recognition remains conservative and transparent.
Growth Trajectory and Market Position
Datadog
- Organic growth driven by expanding cloud adoption and multi-product cross-selling.
- Strong customer retention with net revenue retention rates above 130%.
- Inorganic growth through strategic acquisitions (e.g., CoScreen, Seekret) enhancing security and collaboration capabilities.
- Market leadership in cloud monitoring with increasing enterprise penetration.
Apple
- Growth slowing due to smartphone market saturation and macroeconomic headwinds.
- Services segment growing but at a decelerating pace compared to prior years.
- Supply chain and geopolitical risks impacting product availability and costs.
- Strong brand loyalty and ecosystem remain competitive advantages but may not offset near-term growth challenges.
Revenue Growth Comparison (2022-2024 TTM)
Operating Margin Trend (2022-2024 TTM)
Investment Recommendation
Buy: Datadog, Inc.
Datadog’s accelerating revenue growth, improving profitability, and scalable SaaS business model position it well for continued expansion. The company’s strong net retention and product innovation support sustainable earnings quality. Valuation remains attractive relative to growth peers, making it a compelling buy for investors seeking exposure to cloud infrastructure monitoring.
Sell: Apple Inc.
Despite Apple’s dominant market position and cash flow strength, near-term risks including slowing revenue growth, margin pressures, and valuation concerns suggest caution. Investors may consider reducing exposure to Apple in favor of higher-growth opportunities until clearer signs of renewed momentum emerge.
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