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Among the many flavors of cloud-focused enterprise software platforms, you will find Dynatrace (NYSE: DT), which is an intermediate cap currently correcting below the October 25 high at $80.13.
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Waltham, Massachusetts, announced Monday that CEO John Van Cyckelen will retire at the end of the year. Rick McConnell, current president and general manager of the Security Technology Group at Akamai Technologies (NASDAQ: AKAM) Dynatrace’s new CEO was appointed on December 13th. Van Sicklen will remain advisor until May 31, 2022, to facilitate the CEO transition.
The company is developing a software intelligence platform that helps enterprise customers modernize and automate IT operations.
Despite steadily increasing profits and revenue, Dynatrace fell nearly 10% on October 27 following the company’s second-quarter financial report. Earnings came in at $0.18 per share, ahead of views requiring $0.16 per share. Revenue was $226.4 million, beating estimates of $220.66 million.
Data compiled by MarketBeat It reveals that Dynatrace has exceeded earnings and sales expectations in each of the past nine quarters.
Analysts expect earnings of $0.65 per share for the full fiscal year, just 3% more than a year ago. Next year, we saw a 23% rise to $0.80 per share. Both estimates were recently revised higher.
Discussing growth at the quarterly conference call, Van Seyklin said: “We continue to invest aggressively to grow our sales force, expand our partner relationships and increase awareness of the Dynatrace brand in the marketplace. Our ability to attract talent to Dynatrace has never been stronger. Equity transfers increased by more than 30% during the last quarter of last year and we expect to continue to grow this team by 30% or more for the foreseeable future.”
In addition to increasing earnings and revenue, other highlights for the quarter were:
- Total accounting rate of return $864 million, an increase of 35%, or 34% on a constant currency basis
- Subscription revenue is $213 million, up 35% or 33% on a constant currency basis, representing 94% of total revenue
- Deepening strategic partnerships with Microsoft and Google, making Dynatrace available locally across all three ultrawide platforms: Microsoft Azure, Google Cloud Platform, and Amazon Web Services
- SpectX, a high-speed analysis and query analytics company, has been acquired to help accelerate the convergence of monitoring capability and security
Despite all the good news, including an increase in FY 2022 earnings guidance, investors have been put off by some currency exchange details.
On the earnings call, CFO Kevin Burns clarified this situation.
“So for the year, as I mentioned on the call, our guidance has been reduced as reported by about $15 million or two percentage points of FX-related growth. Most of that came as a result of the dollar strengthening primarily against the euro and the British pound as well as against the Australian dollar. So These are sort of one of the three major currencies we’ve been working with where we’ve seen the currency move backwards — towards the end of the second quarter,” he said.
He added, “What we would like investors to focus on is definitely the constant ARR growth of the coin, which we increased by about 250 basis points in the middle of the year, so we are trying to normalize any of those adverse foreign exchanges there.”
Profit taking after the rally may also have an effect on the recent price decline. Dynatrace shares are up 62.61% year over year and 95.61% year over year. It is not unusual to see large institutions pull some money off the table after this kind of recovery.
The current boost is in its fourth week. A proper base needs at least five weeks to form. Barring a quick bounce in the next week and a half, we may see the start of forming a new base for Dynatrace stocks.
This pullback may look sharp on the chart, but stocks are holding above the 200-day line, a sign that big investors aren’t saving en masse. While there is reason to be optimistic about Dynatrace’s potential, it is too early to buy; Wait at least for the stock to resume its upward trend.