Software maker Dynatrace is the IBD Stock of the Day as the company upgraded its Grail platform earlier this year with new automation and artificial intelligence features. The move could provide a long-term boost to DT stock, analysts say.
But Wall Street also is debating a market-share shift among companies that offer "observability," a field where Dynatrace plays. The term refers to monitoring internal computer networks as well as following application performance over cloud-computing infrastructure.
Dynatrace's computer network monitoring tools measure and analyze the performance of business-critical applications. Many of its customers use cloud-computing platforms, such Amazon.com's Amazon Web Services.
And Dynatrace faces a crowded market with the likes of Datadog, Cisco Systems, Splunk, New Relic and numerous startups.
In general, industry players have started out with one or two key products and have broadened their offerings into "observability" platforms, said a Barclays report. The software companies aim to drive multiproduct adoption among customers.
One concern for DT stock if the U.S. economy falls into a recession is that Dynatrace's price points are higher than those of most rivals, analysts say.
Expanding Through Grail Platform
Still, Dynatrace plans to provide application security services as part of the expansion of its Grail platform.
Dynatrace unveiled improvements to its Grail observability platform in February. New add-on services will be rolled out through 2023.
"We continue to believe the new Grail platform is completely unmatched by the competition," Wells Fargo analyst Andrew Nowinski said in a recent note to clients. "Other platforms lack automation, which is a key reason customers choose Dynatrace."
JPMorgan analyst Pinjalim Bora also is bullish on Dynatrace's technology edge. In his note to clients, Bora referred to a customer's view.
"The customer is very positive on Dynatrace's artificial intelligence capabilities, especially with respect to application-performance monitoring-related use cases," Bora said. "He opines that Dynatrace's AI is 'way ahead' of Datadog, (Cisco's) AppDynamics and New Relic."
Dynatrace Stock Forms Long Trend Line
On the stock market today, shares in Dynatrace rose 3.1% to close at 43.65. DT stock has gained 13% in 2023. The tech-heavy Nasdaq composite is up nearly 15%
DT stock is in consolidation and has formed a long trendline, having been in a trading range for the past year.
In addition, DT stock holds an official entry point of 48.10. But the stock is actionable from a downward trendline, or above 43.42, for aggressive investors. DT stock is listed on IBD SwingTrader.
Earnings for DT stock are due May 17. One strategy around earnings would be the use of call options. Also, that allows investors to buy stocks at a predetermined price.
Shares in Waltham, Mass.-based Dynatrace pulled back in late 2021 after Chief Executive John Van Siclen retired. The company named Rick McConnell, then president and general manager of the security technology group at Akamai Technologies, as its new CEO.
Relative Strength For DT Stock
Dynatrace stock owns a Relative Strength Rating of 83 out of a best-possible 99, according to IBD Stock Checkup. The company went public on Aug. 1, 2019, backed by private equity firm Thoma Bravo. Further, the Dynatrace IPO raised $570 million.
Thoma Bravo in early 2023 sold $667 million worth of shares.
Dynatrace stock owns an Accumulation/Distribution Rating of C-. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading.
Meanwhile, DT stock holds an IBD Composite Rating of 91 out of a best possible 99. The best growth stocks have a Composite Rating of 90 or better.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
