Why High-Growth Tech Stocks Like Datadog Rose Today

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The Motley Fool

What happened

It was good to be a tech stock investor on Tuesday, as shares of a great many companies in the sector rose notably on the day.

Thumping the broader market were, among others, Datadog (NASDAQ: DDOG) with a nearly 10% increase, Snowflake (NYSE: SNOW) , up 6.5%, and Okta (NASDAQ: OKTA) , which posted an almost 6% gain. Meanwhile, HubSpot (NYSE: HUBS) added nearly 7%, and Adobe (NASDAQ: ADBE) was up by over 4%.

Image source: Getty Images.

So what

Those moves were part of a large, sweeping, overall rally in tech titles . Such stocks had been punished in recent days as investors bailed out of potential high-growth companies considered to be relatively risky plays. Now, with recent news that the omicron variant of the coronavirus might be less severe than its delta predecessor, the appetite for risk seems to be rising again.

None of the five mentioned stocks were featured in headlines Tuesday that would have individually swung their share prices so dramatically.

A slight exception is Snowflake, which on Monday saw its price target raised modestly by analyst Phil Winslow of Credit Suisse .

Winslow upped said target by $10 to $465 per share while keeping his outperform (read: buy) recommendation on the stock. He pointed out in a new research note that the company's third-quarter results were vastly better than expectations, and it remains an innovator as a business that effectively ties together disparate IT information sources for clients.

Now what

Like Snowflake, Datadog, Okta, HubSpot, and -- to a lesser extent -- veteran operator Adobe occupy tech sector niches full of promise for significant growth. But the downside to that is that such titles can be very volatile, and what shoots higher can then plummet earthward if the circumstances turn sour. Buyer, beware.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Datadog, HubSpot, Okta, and Snowflake Inc. The Motley Fool recommends Adobe Inc. The Motley Fool has a disclosure policy .

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