Software stock Dynatrace is Monday's IBD 50 Stocks To Watch pick. This leading computer network monitoring and automation company will report earnings on Wednesday before the market opens.
Dynatrace provides monitoring, security, analytics and automation solutions to the financial services, retail and e-commerce, government, technology and education markets.
Dynatrace stock is on the IBD Leaderboard Sector Leaders list.
Software Stock Hit 52-Week High On AI News
Shares are in the 5% buy zone of a five-week flat base reaching to 55.64 with a 52.99 buy point, according to MarketSmith analysis of its weekly chart.
The software stock broke out of a cup base, hitting the 48 entry following the company's better-than-expected March-ended quarterly results on May 17. Shares trended upward before flattening out and then staged a two-day rally that pushed the stock to a 52-week high on July 12.
The move came following news that market research company Gartner named it a leader out of 19 companies evaluated in the 2023 Magic Quadrant for Application Performance Monitoring (APM) and Observability report.
But several days later the stock started to deteriorate and fell below its 21-day exponential moving average, though it found support at its 50-day moving average on July 24. Shares jumped the next day after Dynatrace announced its expanded Davis AI engine aimed at creating a hypermodal AI. Hypermodal AI combines predictive, causal and generative AI techniques in its functionality.
The enhanced AI capabilities will help boost productivity across business, development, security and operations teams by providing generative-AI recommendations.
JPM Securities raised its price target on the stock to 56 and maintained its outperform rating following the news. Shares rose over 1% on Monday after RBC Capital raised its price target to 60 from 52 and held its outperform rating on the software stock.
Dynatrace Earnings On Tap For Wednesday
Dynatrace reports its June-ended fiscal first-quarter earnings on Wednesday before the market opens. Analysts tracked by FactSet put consensus earnings estimates at 22 cents per share, up 22% from 18 cents in last year's same quarter. This marks a slowdown from impressive 82% and 39% EPS growth in the prior two quarters. The company has a history of exceeding analysts' forecasts, including a nearly 40% beat last quarter.
For fiscal full-year 2024, analysts expect EPS to grow a modest 3% to $1 per share after growing 42.6% in fiscal 2023. Wall Street sees earnings rising 17% in 2025.
FactSet estimates fiscal first-quarter sales popping 22.3% year over year to $327 million, slowing slightly from the 25% and 24% growth the last two quarters.
For the full fiscal 2024, analysts project sales will grow 20.8% to $1.4 billion from $1.158 billion in 2023, and increase 18.8% to $1.663 billion in 2025.
Dynatrace ranks No. 1 out of 126 stocks in the computer software-enterprise group. The group ranks a high No. 19 out of the 197 IBD industry groups, up from No. 25 four weeks ago.
Mutual funds own a considerable 68% of the software stock, with 1,252 funds owning the stock in June, up from 1,207 in March and 1,091 in December.
The company holds top-notch 99 Composite and EPS Ratings.
Follow Kimberley Koenig for more stock market news on Twitter @IBD_KKoenig.
