Growth Stock Dynatrace Provides Tools for Amazon, Microsoft

Dynatrace (DT) solidified its spot in IBD Sector Leaders with better-than-expected December-quarter results. The growth stock faces a test, however.

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The stock broke out on the earnings report and gapped up above a buy point of 41.25 in strong volume from a flat base.

Because the breakout gapped above the buy point, the buy zone is adjusted to a higher range. That placed the revised buy zone at 43.38-45.55. Dynatrace is now below that range but hasn’t made any sell signals despite what appears to be a pullback.

The company closed a secondary offering of 15 million shares on Feb. 10. That appeared to pressure the stock.

However, the growth stock ranks second in the enterprise software group. The group itself holds 74th place among IBD’s 197 industry groups.

Strong Earnings Support Growth Stock

Dynatrace has a strong record of sales and earnings growth over the past eight quarters. The impressive earnings performance has given the growth stock an EPS Rating of 97. In the fourth quarter, sales grew 24% to $297.5 million. Earnings increased 39% to 25 cents per share.

The Waltham, Mass.-based company provides a software intelligence platform. It allows businesses to automate their IT operations, and update and launch new software.  Its artificial intelligence feature assesses whether any anomaly that the software detects has an impact on customers.

Dynatrace has partnered with Amazon.com (AMZN), Google-parent Alphabet (GOOGL) and Microsoft (MSFT). The software as a service platform improves continuous observability of the cloud environment.

Dynatrace’s AI-powered software improves observation and monitoring in massive cloud platforms such as Amazon Web Services, Microsoft Azure and Google Cloud.

Partnering With Dynatrace To Reduce Costs

Meanwhile, partnering with Dynatrace is one of the ways companies running hybrid cloud environments have been reducing  costs. Industries using its software include banking, insurance, manufacturing, retail and travel.

More recently, the growth stock surged after a partnership with Synk that makes software delivery more secure.

The company has made a few acquisitions in recent years. In 2021, it acquired SpectX and its high-speed analytics tools. Terms of the deal were not disclosed.

Mutual funds own over 71% of shares outstanding of the growth stock. Exchange traded funds own shares of the stock as well. The Invesco Dynamic Networking ETF (PXQ) and Global X Robotics and Artificial Intelligence ETF (BOTZ) hold shares of Dynatrace.

Please follow VRamakrishnan on Twitter for more news on growth stocks.

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