Dynatrace Inc Stock up 107% Since March; Bullish on COVID-19 Fears

Dynatrace Inc in Record Territory…up 107% Since March

Dynatrace Inc (NYSE:DT) is an off-the-radar tech stock that has been on fire since the markets bottomed in March. Even on days when the broader markets are retracing over concerns about a return of the coronavirus (COVID-19) in the U.S. and China, Dynatrace remains bullish.

The provider of cloud computing-related software has seen its share price increase 50.6% year-to-date and advance 107.9% since March.

Why is Dynatrace stock rising on days when the rest of the market is in decline?

Two of the biggest reasons: 1) fears of a resurgence in COVID-19; and 2) the idea that more Americans working from home will be the new norm.

For starters, there’s growing concern that there will be a second wave of COVID-19 later this year. The U.S. is opening up its economy, but more than 20 states are already seeing a massive increase in new COVID-19 cases.

Key states like Michigan, Arizona, Texas, Florida, Arkansas, Nevada, Oregon, and Utah have seen their coronavirus infection rates soar. Meanwhile, in New York, Gov. Cuomo warned he would roll back the reopening of the state’s economy if people continued to violate COVID-19 restrictions.

Are the increases a result of a resurgence of COVID-19 cases? No one is really sure. It could be a result of more testing being done on top of regional breakouts. Others say it is a result of lifting stay-at-home orders that have been in place since early spring.

Due to the coronavirus and the shutdown of global economies, more and more people have been working from home. The sudden shift to working remotely has made applications and the clouds they run on to become even more essential.

And with productivity levels up, employers like what they are seeing, with many saying that working remotely, even for just part of the week, will be the new norm.

DT Stock Overview

Dynatrace Inc is a software intelligence company that provides a software intelligence platform designed for cloud applications. The company’s products work in various applications, including mobile apps, web pages, web browsers, and web servers. (Source: “Corporate Overview,” Dynatrace Inc, last accessed June 15, 2020.)

The company’s products are used by over 2,300 companies in 80 countries, serving the banking, retail, insurance, manufacturing, and travel sectors.

(Source: “Dynatrace, Inc. (DT),” Yahoo! Finance, last accessed June 15, 2020.)

Chart courtesy of StockCharts.com

Dynatrace’s share price ended 2019 on a strong note, which carried on into the early part of 2020. The company’s stock hit a new record high in early February, but that momentum was cobbled by concerns about how COVID-19 would impact the global economy.

Like the rest of the global markets, Dynatrace saw its share price tumble in March. Since then though, the company’s share price has been on fire. In late May, Dynatrace stock surpassed its pre-COVID-19 levels and went on to hit a new record high of $39.41 on June 9.

Strong Fourth-Quarter Results

During this unstable period, a company’s most recent financial results might not be indicative of their short- and long-term outlooks. This isn’t the case with Dynatrace. The company’s products are in even more demand. So, Dynatrace’s most recent financial results do, in fact, give a good snapshot of where the company is heading.

On May 12, Dynatrace announced its financial results for the fourth quarter of fiscal 2020 ended March 31, 2020.

Fourth-quarter revenue was up 30% year-over-year to $150.6 million. Subscription and services revenue was up 37% at $108.6 million. (Source: “Dynatrace Reports Fourth Quarter and Full Year Fiscal Year 2020 Financial Results,” Dynatrace Inc, May 12, 2020.)

The company reported fourth-quarter earnings per share of $0.16 per diluted share, compared to a loss of $0.13 per share in the same prior-year period. Adjusted net income was $0.11 per share, compared to $0.03 in the fourth quarter of 2019.

John Van Siclen, CEO, commented, “Despite these challenging times, our strong platform differentiation, balanced business model, and world-class team put us in a strong position for continued success in the world ahead.”

For the first quarter of fiscal 2021, ended June 30, 2020, Dynatrace expects to report:

• Total revenue in the range of $148.0 million to $150.0 million, representing growth of 24% to 25%
• Adjusted net income in the range of $26.5 million to $28.0 million
• Adjusted net income per share in the range of $0.09 to $0.10

Analyst Take

Dynatrace’s share price has been on a tear since bottoming in mid-March, advancing nearly 110%. That momentum should continue. The demand for the cloud and the applications it runs on was already strong heading into 2020. COVID-19 has increased the demand for those kinds of products even more. And that demand is only going to get stronger.