Stock Story -
What Happened: Shares of application performance monitoring software provider Dynatrace (NYSE:DT) jumped 14.9% in the pre-market session after the company reported second quarter earnings results. Dynatrace narrowly topped analysts' revenue and operating profit expectations during the quarter. The next quarter and full year's guidance for revenue and operating profit were both roughly in line with expectations, showing that the company is on track. Overall, this was a solid quarter for Dynatrace.
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What is the market telling us: Dynatrace's shares are quite volatile and over the last year have had 2 moves greater than 5%. But moves this big are very rare even for Dynatrace and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 6 months ago, when the stock dropped 15% on the news that the company reported third-quarter results with billings falling below Wall Street's expectations. And while full-year revenue guidance came in higher than Wall Street's estimates, full-year ARR (annual recurring revenue) came in below expectations. Also, its gross margin fell. Zooming out, this was a mixed quarter, but with software stocks that are often expensive from a valuation perspective, small misses can lead to big disappointments.
Dynatrace is down 11.8% since the beginning of the year, and at $46.56 per share it is trading 23.3% below its 52-week high of $60.70 from February 2024. Investors who bought $1,000 worth of Dynatrace's shares 5 years ago would now be looking at an investment worth $1,781.
