Dynatrace Earnings: Strong Sales Growth Remains a Bright Spot Even as Macro Pressures Persist

We are maintaining our $44 fair value estimate for narrow-moat Dynatrace after the firm kicked off fiscal 2024 with strong financial results marginally above our estimates. At the same time, we believe the macro uncertainty, manifesting in elongated sales cycles, remains a drag on the firm’s near-term financial prospects. On the bright side, we remain impressed by Dynatrace’s proven ability to strongly execute on its land-and-expand model despite the tough macro. We believe that as Dynatrace attracts and expands more customers, it is able to entrench itself further into its customers’ ecosystems, thereby increasing the switching costs that have helped build an economic moat around its business. With shares trading around $51, down notably after the earnings release, we view Dynatrace's shares as trading in our 3-star range and see them as fairly valued.