Dynatrace Lowers Guidance as Close Rates Dip in a Tough Macroeconomic Environment; Lower FVE to $40

We are lowering our fair value estimate for Dynatrace to $40 from $46 after the firm closed out its second quarter of fiscal-year 2023 with guidance for the remaining half of the year below our estimates. While we continue to have a positive outlook on Dynatrace’s future, we believe macroeconomic headwinds will hamper the firm’s financials in the near term as sales cycles elongate and clients expand their Dynatrace usage at a slower pace. We also expect fiscal 2024 to be impacted by the dreary macroeconomic environment. With shares trading at $34, flat after the earnings release, we view Dynatrace as moderately undervalued even after our fair value estimate revision.