DDOG - Why Dynatrace Is An Excellent Long-Term Buy
2024-04-17 17:37:03 ET
Summary
- Dynatrace is ranked as the highest leader in application process monitoring and observability by Gartner.
- The APM and observability market has a large and growing TAM, with significant growth potential.
- Dynatrace's Full-Stack Monitoring & Analysis integrated service is a major competitive advantage.
- The stock is currently 25% below its 52-week high and is a solid investment opportunity with years of secular growth ahead.
Dynatrace ( DT ) is the best in class and highest ranked leader by Gartner in the application process monitoring, APM and observability space. Last April, I had written about closest competitor Datadog ( DDOG ), recommending buying the stock on declines only, as I felt it was overpriced at that time, as was Dynatrace in my view. I did subsequently buy Datadog and still own it. I bought Dynatrace in March 2024, 25% below its 52-week high of $61 - it looks like a solid investment at these levels. It isn't cheap at 9.5x sales with a sales growth of 23% in 2024 - the price to sales growth ratio is 0.41, above my usual cap of 0.3. Given rising bond yields, the 10 year is at 4.69% and the seeming reluctance of the Fed to cut rates in the face of stubborn inflation, I believe that the stock could easily fall another 10 to 15% as long duration tech growth stories usually do when interest rates go north or remain high. I will continue to accumulate as the price falls....
Why Dynatrace Is An Excellent Long-Term Buy