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Here’s Why Dynatrace Stock Is Falling Today


What happened

Shares of Dynatrace (NYSE:DT) were tumbling this morning after the company reported its third-quarter results. While Dynatrace beat analysts’ consensus estimates for both revenue and earnings in the quarter, investors seemed dissatisfied with the company’s annual recurring revenue. 

The tech stock was down by 21.5% as of 10:59 a.m. ET. 

So what 

Dynatrace, which provides a software intelligence platform for businesses, reported revenue of $241 million, up 32% from the year-ago quarter, which outpaced Wall Street’s expectation of $234.5 million. Additionally, the company’s non-GAAP (adjusted) earnings per share of $0.18 was higher than analysts’ consensus estimate of $0.16. 

A person looks at their smartphone, with the head on their forehead.

Image source: Getty Images.

This was the first earnings report under Dynatrace’s new CEO, Rick McConnell, following longtime CEO John Van Siclen’s departure from the company in December. 

McConnell said in a press release that he was “very pleased with our third quarter performance, beating the high end of guidance across our key operating metrics.”  

But despite the strong result in the quarter, investors seemed to be concerned that Dynatrace’s annual recurring revenue fell below Wall Street’s estimate. Dynatraces’ annual recurring revenue increased 29% year over year, to $930 million, but analysts had expected $942.9 million. 

Now what 

Investors’ strong reaction to Dynatrace’s third-quarter results seems a bit extreme. Generally, the company had a strong quarter, despite missing analysts’ consensus estimate for annual recurring revenue. 

Today’s drop may be part of a growing negative sentiment toward Dynatrace’s stock. The company’s share price has fallen 40% over the past three months. Tech stocks in general began stumbling in January because of inflation worries and talk of the Federal Reserve raising interest rates this year. All of which may be causing Dynatrace investors to go searching for other places to invest their money.

 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.





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