Dynatrace stock rating reiterated at Buy by TD Cowen on solid partner checks

Investing.com - TD Cowen has reiterated its Buy rating and $65.00 price target on Dynatrace Inc. (NYSE:DT) ahead of the company’s fiscal second-quarter earnings report expected in early November. According to InvestingPro data, the stock appears undervalued at its current price of $47.67, with impressive gross profit margins of 82%.

The research firm expects Dynatrace to beat current expectations and slightly raise its annual recurring revenue (ARR) guidance on a constant currency basis, citing solid partner checks in its analysis.

TD Cowen noted that the company’s transition to semi-annual quotas last year benefited second-quarter ARR, and analysts anticipate this pattern will repeat in the current quarter, with the firm viewing Dynatrace’s net new ARR guidance as conservative.

Dynatrace shares have underperformed this year, declining 12% year-to-date and 5% since its last earnings report, creating what TD Cowen describes as "low expectations" for the upcoming results.

The firm considers Dynatrace’s current valuation of approximately 20 times enterprise value to calendar year 2027 estimated free cash flow as attractive, positioning the company as a "cash flow compounder and core holding for GARP portfolios."

In other recent news, Dynatrace has achieved the Amazon Web Services (AWS) Generative AI Competency, highlighting its capabilities in monitoring and governing generative AI applications on AWS infrastructure. This achievement underscores the company’s focus on optimizing AI performance and ensuring responsible AI governance. Additionally, Dynatrace announced its participation in the GitHub MCP Registry, which aims to enhance developer workflows by offering real-time insights into application performance, security, and reliability.

In terms of analyst perspectives, BMO Capital has adjusted its price target for Dynatrace to $56.00, down from $62.00, citing modest ARR upside for the upcoming September quarter. Despite this adjustment, BMO Capital maintains an Outperform rating, suggesting confidence in the company’s future prospects. KeyBanc continues to support Dynatrace with an Overweight rating and a $69.00 price target, pointing to factors such as improving macroeconomic trends in cloud and consumption as reasons for its positive outlook. These developments reflect a mix of strategic achievements and varied analyst expectations for Dynatrace.

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