Seeing Is Believing: 2 Stocks To Watch As Observability Market Hits $29B

KeyBanc Capital Markets analyst Eric Heath said the observability market reached $29 billion and could continue recording strong growth.

Application performance monitoring (APM) is the largest subsegment, generating 42% of revenues, followed by infrastructure monitoring, generating 34%. Heath initiated coverage on two stocks:

• Dynatrace Inc (NYSE:DT) with an Overweight rating and price target of $69.
• Elastic NV (NYSE:ESTC) with a Sector Weight rating on the stock.

Check out other analyst stock ratings.

Dynatrace: The company, which is a leader in APM, could continue generating high-teens growth, driven by product and go-to-market catalysts, Heath said in the initiation note. In the enterprise segment, Dynatrace is "a strong #2 consolidator" after Datadog Inc (NASDAQ:DDOG), he added.

"Enterprises are still early in their efforts to consolidate observability tools and Dynatrace's improvements on both product (Grail, logs, LLM observability) and GTM (DPS, Splunk displacements, enterprise focus) we believe will accelerate DT's consolidation activity," the analyst wrote.

Elastic NV: Elastic's data and analytics platform can address several use cases, including Search, Observability, and Security (SIEM), Heath said.

The Search market had matured, but GenAI is "driving a resurgence," the analyst said. He added, however, that this is also resulting in greater competition.

While supporting several use cases, Elastic is "not as differentiated in Observability and SIEM," and faces a highly competitive market.

Price Action: Shares of Dynatrace had risen by 0.15% to $54.29 at the time of publication on Tuesday, while Elastic's stock had risen by 0.12% to $85.81.

Read More:

• Is Datadog Gaining or Losing Market Support?

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