“Software is eating the world,” proclaimed famed venture capitalist Marc Andreessen all the way back in 2011. Today, over $1.3 trillion of software is sold every year – and this number is expected to breach the $2 trillion mark in just a few short years.
With software proving to be some of the most valuable business assets in the world, it’s no surprise that an entire industry dedicated to ensuring these software assets can be properly managed has sprung up.
The name of this industry? Software intelligence.
Today’s daily stock pick is a company that has been leveraging a cutting-edge AI platform to perform software intelligence – enabling software companies to innovate faster, deliver higher quality, and operate more efficiently and securely.
This stock has performed strongly this year – rising almost 30% – and delivered recent earnings that were soundly ahead of estimates. As the tech sector continues its bullish rise, this stock has been flying under the radar – but it should be on the watchlist of every savvy investor.
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Dynatrace, Inc. (DT)
Dynatrace went public in August 2019, and – much like the rest of the tech sector – saw its stock price surge in 2021, hitting a high of $79 in October 2021. Today, the stock is trading at just under $50 – almost 40% below its peak.
Yet, despite the decline in its stock price, the company has made impressive leaps since then, with a steadily growing revenue and customer base, not to mention new features – such as its AutomationEngine, which help organizations operate their cloud infrastructure much more efficiently.
Last week, Dynatrace reported earnings for the first quarter of 2023 (the end of its fiscal 2023 year), with adjusted earnings-per-share coming in at $0.31 versus analyst forecasts of $0.22. This was an 82% jump in EPS from a year earlier, and also marked the third consecutive quarter of accelerating earnings growth. The company also provided strong guidance for FY2024.
The stock has been a strong performer this year – rising 28%. However, despite the positive earnings, Dynatrace stock did not see a big pop, most likely because its legacy owner – private equity firm Thoma Bravo – is still unloading its substantial stake. There is also a significant tax impact on its free cash flow looming, but this is one of those “good problems” to have.
All in, Dynatrace is a stock worth paying attention to – particularly as the AI revolution gains steam. Sure it may not be the first stock investors think of when it comes to AI – but the biggest opportunities usually happen in these lesser-known stocks.
To your wealth,
Felix @ Ace of Investing