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(Source: TC2000.com)
Unity Software (U) and Datadog (DDOG) are both in the Software industry group, and both have posted strong quarter-to-date performance, easily outperforming their tech peers. While Datadog is a data observability service for cloud-scale applications, Unity is a video-game software development company founded in Denmark. With revenue growth rates of 67% year-over-year and 48% year-over-year, respectively, both companies are seeing exceptional growth and are in the sweet spot from an institutional investment standpoint. This is because Datadog just turned profitable last year with positive annual earnings per share [EPS], and Unity will flip to positive EPS in early 2023. From an investment standpoint, the move to profitability should lead to continued institutional accumulation, given that some growth funds wait for stocks to post positive earnings growth before building positions. This is evidenced by recent fund flows, with funds holding Unity up more than 50% from Q1 to Q2, and Datadog ownership up sharply as well (997 funds vs. 964 funds). Let’s take a closer look at both companies below:
