Dynatrace Falls 9.9% Despite Posting Strong Beat-and-Raise Q2 Results


Shares of Dynatrace, Inc. (DT), a software intelligence platform, fell 9.9% despite reporting better-than-expected second-quarter results and beating expectations. Shares closed at $70.03 on October 27.

The company posted earnings of $0.18 per share, up 12.5% year-over-year and 2 cents better than analyst estimates of $0.16 per share.

To add to that, total revenue climbed 34% year-over-year to $226.35 million and also outpaced Street estimates of $220.61 million. Subscription revenue, a major contributor to total revenue, came in at $212.60 million, growing 35% compared to the prior-year period.

Additionally, DT’s Annual Recurring Revenue (ARR) stood at $863.86 million, also increasing 35% compared to the year-ago period. (See Insiders’ Hot Stocks on TipRanks)

Commenting on the performance, John Van Siclen, CEO of Dynatrace, said, “We continue to see robust investment in digital transformation across all industries and all geographies. And our unique approach unifying AIOps capabilities with observability and application security continues to provide us with a powerful value advantage.”

Based on the current business performance, Dynatrace guided for third-quarter revenue to fall in the range of $233 – $235 million, and earnings are forecast at $0.16 per share. Also, Q3 subscription revenue is expected between $219.5 – 221 million.

Moreover, Dynatrace lifted its full-year Fiscal 2022 guidance and now expects revenue to be in the range of $913 – $919 million compared to the consensus estimate of $910 million. FY22 earnings are forecast to be between $0.63 – $0.65 per share, while the consensus estimate is pegged at $0.63 per share. Also, FY22 subscription revenue and ARR are projected to be in the ranges of $857.5 – 862.5 million and $986 – $996 million, respectively.

In response to Dynatrace’s quarterly performance, Robert W. Baird analyst Jonathan Ruykhaver maintained a Buy rating on the stock with a price target of $85, implying 21.4% upside potential.

Ruykhaver was impressed with the solid Q2 results but also pointed to currency headwinds. The analyst is encouraged by DT’s net expansion and new logo adds.

Ruykhaver said, “We have been positive on the investments the company has been making in go-to-market (including investments in channel), which should help support a continuation of healthy growth for years to come. We believe Dynatrace remains well-positioned in the enterprise market for observability where we see secular tailwinds like digital transformation driving growth.”

With 12 Buys and 1 Hold, the stock commands a Strong Buy consensus rating. The average Dynatrace price target of $83.08 implies 18.6% upside potential to current levels. Shares have gained 93.9% over the past year.

Further, TipRanks data shows that financial blogger opinions are 100% Bullish on DT, compared to a sector average of 69%.

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