Dynatrace (DT): Revisiting Valuation After New Google Cloud Gemini Partnership Strengthens Its AI Observability Story

Dynatrace (DT) just tightened its ties with Google Cloud, stepping in as a launch partner for Gemini CLI extensions and Gemini Enterprise, and that move could subtly reshape how investors think about its AI growth story.

See our latest analysis for Dynatrace.

That deeper Google Cloud tie up lands after a strong earnings beat and expanded AWS integrations. Yet the share price has a roughly 19% year to date share price decline and three year total shareholder return of about 18%, suggesting longer term confidence is intact even as near term momentum cools.

If Dynatrace's AI push has your attention, this could be a good moment to explore other high growth tech stories using high growth tech and AI stocks as a starting point for ideas.

With the stock trading nearly 38 percent below both analyst targets and some intrinsic value estimates despite double digit growth, is Dynatrace quietly undervalued, or is the market already baking in its next AI chapter?

Most Popular Narrative: 27.3% Undervalued

With Dynatrace last closing at 44.17 dollars versus a narrative fair value near 60.78 dollars, the valuation case leans heavily on future earnings power and multiples.

The analysts have a consensus price target of $63.094 for Dynatrace based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $70.0, and the most bearish reporting a price target of just $55.0.

Read the complete narrative.

Curious what kind of revenue runway and profit margins would justify a richer earnings multiple than the broader software space. Want to see the exact assumptions driving that fair value and where analysts disagree most sharply on Dynatrace's earnings path and terminal valuation multiple.

Result: Fair Value of $60.78 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, intensifying competition and longer, more uneven enterprise deal cycles could quickly undermine the bullish AI and valuation narrative if execution slips.

Find out about the key risks to this Dynatrace narrative.

Build Your Own Dynatrace Narrative

If you see the story differently or want to test your own assumptions, you can build a complete narrative in just a few minutes. Do it your way.

A good starting point is our analysis highlighting 5 key rewards investors are optimistic about regarding Dynatrace.

Looking for more investment ideas?

If you want a stronger edge than the crowd, make your next move using the Simply Wall St Screener and uncover opportunities others are still missing.

• Capture potential multi-bagger upside early by scanning through these 3633 penny stocks with strong financials that already show solid financial underpinnings.
• Ride the next wave of innovation by targeting these 24 AI penny stocks positioned at the center of real world artificial intelligence adoption.
• Lock in attractive entry points with these 12 dividend stocks with yields > 3% that combine meaningful income with the potential for long term capital growth.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com