Dynatrace shares target cut on mixed guidance By

On Monday, FBN Securities adjusted its outlook on Dynatrace Inc. (NYSE: NYSE:), reducing the stock price target from $65.00 to $60.00, while maintaining an Outperform rating on the company’s stock.

The revision follows Dynatrace’s third fiscal quarter report, which showed a year-over-year revenue increase of 21%, slightly surpassing consensus estimates by 1%. The company’s Annual Recurring Revenue (ARR) also saw a similar growth of 21% year-over-year, marginally above consensus.

Despite the revenue and ARR uptick, Dynatrace provided guidance for the first quarter and full fiscal year 2025 that fell short of market expectations. The forecast for Q1 revenue is set at $391 million to $393 million, approximately 2% below the consensus estimate of $398.6 million.

For fiscal year 2025, the company anticipates revenues to be between $1.644 billion and $1.658 billion, representing a 15-16% year-over-year increase, yet still 2% lower than the consensus estimate of $1.680 billion, using the guidance’s midpoint.

Dynatrace’s guidance has factored in a cautious approach, acknowledging a $10 million foreign exchange headwind impacting fiscal year 2024 revenue and ARR figures. Even when adjusting for this, the new fiscal year 2024 revenue guidance is below consensus.

The company also indicated a delay in achieving the $100 million ARR milestone for both its log and AppSec businesses, now expected in fiscal year 2026 rather than late fiscal year 2025, due to current consumption trends.

The company is currently experiencing a transitional phase with over 30% of its accounts being handled by new sales representatives. This shift is incorporated into Dynatrace’s guidance, which considers the potential for short-term impacts resulting from these changes. FBN Securities has updated its model to reflect these adjustments and the latest financial information provided by Dynatrace.

InvestingPro Insights

As Dynatrace Inc. (NYSE: DT) navigates through its transitional phase, investors may seek additional insights to better understand the company’s financial health and market position. According to InvestingPro data, Dynatrace boasts a substantial market cap of $14.17 billion, indicative of its significant presence in the market.

The company’s impressive gross profit margin, which stands at 82.51% as of the last twelve months ending Q4 2024, underscores its ability to maintain profitability amidst operational changes. Furthermore, Dynatrace’s revenue growth remains robust, with a 23.48% increase over the same period, signaling a strong demand for its services.

InvestingPro Tips highlight several key aspects that investors should consider. Dynatrace holds more cash than debt on its balance sheet, providing financial flexibility and a buffer against market volatility. Moreover, analysts forecast that the company will be profitable this year, which may reassure investors despite the recent downward revisions in earnings expectations by some analysts.

For those seeking a deeper dive into Dynatrace’s financial metrics and future prospects, InvestingPro offers a wealth of additional tips – in fact, there are 14 more tips available that could provide further clarity on the investment potential of Dynatrace.

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