On Friday, TD Cowen adjusted its outlook on Dynatrace Inc. (NYSE:DT) shares, a software intelligence company, by reducing the price target to $58 from $62. The firm sustained its Buy rating on the stock. The revision comes ahead of the company's fourth-quarter report, which is expected to be released in mid-May.
The decision to lower the price target was influenced by a partner survey indicating a decline in performance, with only 33% meeting or beating expectations compared to 83% in the previous quarter. Additionally, the calendar year 2024 outlook suggested no growth, a significant drop from the 9% growth forecasted last quarter.
TD Cowen has also modified its fiscal year 2025 Annual Recurring Revenue (ARR) estimates to account for the elongated sales cycles, now expecting 15% growth instead of the previously anticipated 17%. Despite the adjustments, the firm believes that investors have already factored in the possibility of a guidance that falls short of Wall Street expectations, based on management's prior comments.
The firm's analyst maintains that, although the recent survey and outlook adjustments are less than ideal, the majority of checks remain robust. The firm suggests that the long-term risk/reward balance for Dynatrace is still favorable for investors with a long-term perspective. The software intelligence company's upcoming earnings report in May will provide further insights into its performance and future prospects.
InvestingPro Insights
As Dynatrace Inc. (NYSE:DT) prepares for its fourth-quarter report, a look at real-time data and InvestingPro Tips can offer additional context for investors considering the company's long-term value. Dynatrace boasts an impressive gross profit margin, with the last twelve months as of Q3 2024 showing a margin of 82.54%. This strong profitability indicator aligns with the company's robust software intelligence platform's performance.
InvestingPro Tips highlight that Dynatrace is trading at a high Price / Book multiple of 7.15, which may suggest a premium valuation by the market. Additionally, the company's net income is expected to grow this year, indicating potential for future earnings expansion. For investors looking for more in-depth analysis, there are over 10 additional InvestingPro Tips available at https://www.investing.com/pro/DT, which could further inform investment decisions.
To take advantage of the comprehensive insights offered by InvestingPro, use the coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription. This strategic financial data could be crucial for investors seeking to understand the intrinsic value of Dynatrace amidst the adjustments in market expectations.
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