Atlassian, Datadog outperform on cloud migrations: Mizuho

Atlassian (NASDAQ:TEAM), Datadog (NASDAQ:DDOG) and a host of other tech firms look to benefit from increased cloud migrations in the quarters ahead, according to Mizuho.

“We are more bullish than most on cloud adoption over the next couple of years, both from existing on-premise customers and new customers,” said Mizuho analysts, led by Gregg Moskowitz, in a lengthy investor report on the 2025 software outlook.

Mizuho increased Atlassian’s price target to $285 from $240 and maintained an Outperform rating.

“We believe TEAM’s two-pronged approach that consists of next-gen tech (AI and analytics) and an improving group of products only available in cloud, should increasingly drive Data Center to Cloud migrations over the next 2-3 years,” Moskowitz said.

Cloudflare’s (NYSE:NET) target price was increased nearly 25%, to $125 from $102, but it maintained a Neutral rating. Mizuho expects CJ Desai, Cloudflare’s new president of product and engineering, will create more frequent competitor displacements.

Meanwhile, Datadog’s price target was increased to $170 from $155 and maintained an Outperform rating.

“DDOG remains a clear leader in the observability market, with multiple businesses at scale, and with potential tailwinds in the form of digital transformation, cloud migration, and GenAI,” Moskowitz notes. “The company’s R&D investment philosophy is differentiated from competitors and helps DDOG build a strong engineering moat, while more recent sales/channel investments are opportunistic.”

Mizuho nudged Confluent’s (NASDAQ:CFLT) price target to $35 from $31 as Confluent Cloud looks to be a catalyst ahead. It maintained an Outperform rating.

Despite holding an Underperform rating, cybersecurity software firm Fortinet’s (FTNT) price target was bumped to $78 from $68.

“Competition is fierce in the SASE and SecOps markets (FTNT is late to the game on the former), and we’re skeptical that this can truly move the needle over the near-to medium-term,” Mizuho noted.

Rising AI star Palantir (NASDAQ:PLTR) received a modest target price increase to $44 from $37. Mizuho also rates the stock at Underperform, despite its meteoric rise over the past year.

“PLTR has executed better over the last few quarters and there are certainly some exciting aspects of the PLTR story (megadeals, AIP), although this is offset by a lack of transparency and a likelihood of lumpy results going forward, in our view,” Mizuho stated.

The firm also said it is difficult to justify Palantir’s high multiple that discounts material acceleration as well as any upside against consensus estimates.

Amid a slate of higher price targets, Mizuho also downgraded 8×8 (EGHT) to Underperform from Neutral and lowered its price target to $2.50 from $2.75 as revenue growth for the cloud communications platform remains challenged.

RingCentral (RNG) was downgraded to Neutral from Outperform, but held on to its $42 price target.

“We believe the shift to RingCX for all Contact Center use cases, from re-selling NICE InContact up-market, drives reduced visibility around 2025 top-line growth,” said Mizuho analyst Siti Panigrahi.