Why Dynatrace Stock Jumped 31.3% in November

What happened

Shares of Dynatrace (NYSE: DT) gained 31.3% in November, according to data from S&P Global Market Intelligence. On the heels of strong second-quarter results delivered at the end of October, the stock posted gains thanks to favorable analyst coverage, momentum for the broader market, and a conference presentation that was paired with news of a new service partnership.

DT data by YCharts.

Dynatrace published second-quarter earnings on Oct. 30, delivering sales and earnings results that topped the market’s expectations and helped the stock close out the month with an 8% gain despite sell-offs for the broader cloud-software space. The enterprise software management specialist then saw bigger gains in November as cloud stocks posted recovery and some encouraging news rolled in.

Image source: Getty Images.

So what

An analyst at Barclays published a note on Dynatrace stock on Nov. 1, maintaining a buy rating and a $27 price target on the stock. This target represented upside of roughly 33.5% at the time of publication. This came a day after an analyst at Citi raised his rating on the stock from neutral to buy and hiked his price target from $26 to $28.

The positive analyst notes and gains for the broader market set the stage for the stock to post big gains as the month progressed. Shares climbed following the company’s presentation at the RBC Capital Markets’ Technology, Internet, Media and Telecommunications Conference on Nov. 19 and news that Porsche Informatik was onboarding Dynatrace software to help with data management and analytics.

Shares currently trade at roughly $27.

Now what

Dynatrace is guiding for sales between $137 million and $138 million in the third quarter and non-GAAP (adjusted) net income between $30 million and $31 million. That would work out to adjusted per-share earnings between $0.06 and $0.07, presuming a diluted share count of 282 million.

Revenue for the full year is expected to come in between $533 million and $535 million. The company reported sales of $431 million in the previous fiscal year, so management is guiding for sales to grow roughly 24% based on the midpoint of its current target. Dynatrace expects adjusted net income between $119 million and $121 million for the year — working out to adjusted earnings per share between $0.23 and $0.24.

Based on those targets, the company is valued at roughly 114 times expected adjusted earnings and 14 times expected sales for the year.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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