DT US - Accumulate $40-$45; STP <$39 - A Software Recovery Play (No Paywall)
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Analysis by Alex King for Cestrian Capital Research, Inc.
Summary
Dynatrace (DT US) is a worthy if somewhat forgotten software company. With an EV of around $12bn, DT is one of a handful of remaining independent systems monitoring players, the most high profile of which is DataDog (DDOG US). Its fate is likely that of Splunk (acquired by Cisco in 2023) and AppDynamics (also acquired by Cisco, in 2017) which is to say to be consolidated into a larger play. Not necessarily by Cisco of course.
Fundamentals are rock solid; +19% revenue growth on a TTM basis, cashflow margins consistently in the 27-30% range on a TTM basis, huge revenue visibility and a net-cash balance sheet. Trading at just 20x unlevered pretax FCF, the valuation is unchallenging.
The stock chart offers a good risk/reward long setup in my view. There was a spike low down to $40 last week, which looked like an exploratory move to see how many sellers existed below the 200-day moving average (answer: not many). Four trading days later, the stock is now holding over its 21-day EMA, a key risk on / risk off moving average for us. We rate the stock at Accumulate between $40-$45/share with a stop below $39. A price target of $57 I think is reasonable - that’s a re-test of the July 2025 high. So, with spot at $44 that’s $5 down to $13 up, about a 2.5:1 risk/reward to the upside in my opinion.
Financial Fundamentals
This is a very well run business; the order book is worth about 1.7x TTM revenue, TTM revenue growth is at 19% and the order book is growing at 21% YoY, which augurs well for future revenue growth rates. Cashflow margins hover in the 30% range over many years (on a TTM UFCF basis), and the balance sheet is sound with $1.2bn of net cash on hand.
Valuation Multiples
Not at all expensive in my view.
Stock Chart
Full page version, here.
Cestrian Capital Research, Inc - 29 July 2026.