Market News

Despite Q4 Beat, Insiders Sell Dynatrace Stock

Dynatrace Inc. (NYSE: DT) reported stronger-than-expected fiscal Q4 results, topping both earnings and revenue estimates, and its shares gained 0.9% on May 18 to close at 33.12.

Dynatrace is a global technology company that provides a software intelligence platform based on artificial intelligence and automation to monitor and optimize application performance, development, and security.

However, more than the earnings numbers, the insider selling on the stock by top management, which was revealed after the earnings, has become the point of focus.

Q4 Beat

The company posted earnings of $0.17 per share, which was two cents better than analysts’ estimate of $0.19 per share.

Similarly, total revenue climbed 28.7% year-over-year to $252.85 million, outpacing Street estimates of $246.54 million.

Subscription revenue, a major contributor to total revenue, came in at $235 million, growing 31% compared to the prior-year period.

Furthermore, the company recorded adjusted annual recurring revenue (ARR) growth of 35% year-over-year to $995 million.

Informative Sell-Offs

Despite the Q4 beat, insiders at Dynatrace are Neutral about the stock’s near-term prospects and have sold $1.6 million worth of Dynatrace shares in the past three months.

More surprisingly, on the day the company reported its upbeat quarterly results, a number of key executives from Dynatrace’s top management engaged in informative Sells.

Numerous Form 4’s were filed with the SEC, disclosing top management’s informative sell-offs.

Topping the Sell list was departing CFO and Treasurer, Kevin Burns, who made an informative Sell of 21,697 shares of DT stock worth $738,973 at $34.01 price levels, and now holds 141,690 shares worth $4.69 million.

Furthermore, SVP and CTO, Greifeneder Bernd, made an informative Sell of 17,723 shares of DT stock worth $604,560 at $34.01 price levels, and now holds 892,580 shares worth $29.56 million.

On top of that, the company’s CRO, Pace Stephen J., made an informative Sell of 12,635 DT shares worth $430,709. He now holds 112,340 shares worth $3.69 million.

Meanwhile, there was another small Sell transaction by the company’s CAO, Allen Alicia, making an informative Sell of DT shares worth $78,785.

Wall Street’s Take

Following the results, BofA Securities analyst Koji Ikeda decreased the price target on Dynatrace to $58 from $70 and reiterated a Buy rating.

With six Buys and one Hold, the stock commands a Strong Buy consensus rating. At the time of writing, the average Dynatrace price target was $55.67, which implies 68.09% upside potential to current levels. Shares have lost more than 50% over the past six months.

Concluding Thoughts

Insider trading activity makes it possible to quickly find and track insiders’ moves, which is well presented through the TipRanks Insiders’ Hot Stocks tool.

Although there is no clear indication why top insiders indulged in a sell-off worth $1.85 million on the day the company reported upbeat Q4 results, it surely does raise a red flag.

Mixed investor sentiments arise from the strong FY2023 outlook provided on one hand, and the CFO departure announcement made on the same day.

Investors should keep a close watch on the stock as well as the insider’s trading activity in the near term.

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