Company Reports

We are raising our fair value estimate for narrow-moat Dynatrace to $50 from $44 after the firm reported fiscal third-quarter financial results and provided fiscal fourth-quarter guidance ahead of our prior estimates on sales and profitability. Dynatrace’s fiscal 2024 has been marred by macroeconomic pressures that have resulted in elongated sales cycles as customers have dialed back some of their IT spending. We expect fiscal 2025 to offer some reprieve, as macro conditions normalize. From a longer-term perspective, we reiterate our confidence in Dynatrace as a leader in the observability space and continue to have a positive outlook on the firm’s financial prospects. Shares traded down after the earnings report, and we view them as fairly valued.

We have a positive outlook on Dynatrace’s prospects in the observability space. The firm’s products benefit from secular tailwinds driving an accelerating increase in data for enterprises to monitor and analyze. In our opinion, the firm’s sticky product portfolio, broad swath of products that cover the entire IT stack, and increased penetration in its target market have enabled Dynatrace to form a narrow economic moat around its business.

We are maintaining our $44 fair value estimate for narrow-moat Dynatrace after the firm finished its second quarter of fiscal 2024 with results and guidance slightly above our prior expectations. Much like previous quarters, macro pressures continued to weigh on financial results and the company's near-term outlook as customers scrutinize their IT spending amidst macroeconomic uncertainty. Despite the macro pressures, we remain impressed by the firm's ability to maintain a healthy net retention rate, add new customers, and increase profitability during this period. From a long-term perspective, we continue to view Dynatrace as a strong player in the observability space and have a positive outlook on the company's long-term financial prospects. Shares traded slightly up after the earnings report, and we view them as fairly valued.

We are maintaining our $44 fair value estimate for narrow-moat Dynatrace after the firm kicked off fiscal 2024 with strong financial results marginally above our estimates. At the same time, we believe the macro uncertainty, manifesting in elongated sales cycles, remains a drag on the firm’s near-term financial prospects. On the bright side, we remain impressed by Dynatrace’s proven ability to strongly execute on its land-and-expand model despite the tough macro. We believe that as Dynatrace attracts and expands more customers, it is able to entrench itself further into its customers’ ecosystems, thereby increasing the switching costs that have helped build an economic moat around its business. With shares trading around $51, down notably after the earnings release, we view Dynatrace's shares as trading in our 3-star range and see them as fairly valued.

We are raising our fair value estimate for narrow-moat Dynatrace to $44 from $40 due to it finishing fiscal 2023 with financial results above our estimates and the time value of money following our annual model roll. We remain impressed by Dynatrace’s ability to navigate a challenging macro environment as it continues to add new logos and maintains a strong upsell motion for existing customers. We believe that Dynatrace’s proven land-and-expand strategy during a period where clients are seeking to optimize costs underscores the strong switching costs associated with its platform. With shares around $46, down 1% on May 17, we believe Dynatrace’s shares are fairly valued.

We have a positive outlook on Dynatrace’s prospects in the observability space. The firm’s products benefit from secular tailwinds driving an accelerating increase in data for enterprises to monitor and analyze. In our opinion, the firm’s sticky product portfolio, broad swath of products that cover the entire IT stack, and increased penetration in its target market have enabled Dynatrace to form a narrow economic moat around its business.

We have a positive outlook on Dynatrace’s prospects in the observability space. The firm’s products benefit from secular tailwinds driving an accelerating increase in data for enterprises to monitor and analyze. In our opinion, the firm’s sticky product portfolio, broad swath of products that cover the entire IT stack, and increased penetration in its target market have enabled Dynatrace to form a narrow economic moat around its business.

We are maintaining our $40 fair value estimate for narrow-moat Dynatrace after the firm reported strong fiscal 2023 third-quarter financial results. We continue to have a positive outlook on Dynatrace’s ability to penetrate its target market by landing new logos and expanding sales within its existing client base. In our opinion, the firm’s strong execution of its land-and-expand strategy, as evidenced by its solid net retention metric, augments its competitive advantage by increasing switching costs. We believe that this strategy, buoyed by secular tailwinds, will allow Dynatrace to deliver shareholder value in the long run. With the shares up 13% so far on Feb. 1, we believe the market has calibrated its valuation to reflect the firm’s strong fundamentals. We view the stock as fairly valued.

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.

We have a positive outlook on Dynatrace’s prospects in full-stack monitoring and analysis, or FSMA. The firm’s products benefit from secular tailwinds driving an accelerating increase in data for enterprises to monitor and analyze. In our opinion, the firm’s sticky product portfolio, broad swath of products that cover the entire IT stack, and increased penetration in its target market have enabled Dynatrace to form a narrow economic moat around its business.

We are resuming coverage of narrow-moat Dynatrace with a $46 fair value estimate. Shares appear fairly valued to us. Our long-term forecasts are unchanged, as we hold our view that the firm’s products benefit from secular tailwinds driving an accelerating increase in data for enterprises to monitor and analyze.

We are placing Dynatrace under review and expect to resume coverage in the near future.

We are maintaining our fair value estimate for Dynatrace after the firm closed out fiscal 2022 with strong financial results narrowly below our estimates. We continue to have a positive outlook on Dynatrace’s ability to penetrate its target market and upsell its existing customers. In our opinion, the firm’s strong execution of its land-and-expand strategy, as evidenced by its solid net retention metric, augments its durable competitive advantage. We believe that this strategy, buoyed by secular tailwinds behind the firm’s back, will allow Dynatrace to deliver shareholder value in the long run. Despite near-term macroeconomic conditions causing mayhem in tech valuations, we’d advise investors to focus on the long-term opportunities companies such as Dynatrace stand to unlock. With that in mind, we still view Dynatrace as attractively priced for investors looking for mid-cap SaaS exposure.

We are initiating coverage of Dynatrace with a fair value estimate of $46 per share, narrow economic moat rating, positive moat trend rating, and very high uncertainty rating. We currently view the shares as fairly valued.

We have a positive outlook on Dynatrace’s prospects in full-stack monitoring and analysis, or FSMA. The firm’s products benefit from secular tailwinds driving an accelerating increase in data for enterprises to monitor and analyze. In our opinion, the firm’s sticky product portfolio, broad swath of products that cover the entire IT stack, and increased penetration in its target market have enabled Dynatrace to form a narrow economic moat around its business.