Shares of information technology market research and consulting company Gartner (IT -1.20%) are on pace to end this week around 11% higher than last Friday's closing price, with nearly all of that gain taking shape in response to the second-quarter results it released Tuesday morning.
During the quarter, Gartner converted $1.2 billion in revenue into net income of $271 million, for an adjusted operating profit of $2.24. Its top line was up 20% year over year, and per-share earnings jumped nearly 87% versus the COVID-crimped Q2 2020. Perhaps more important though, Gartner crushed analysts' estimates for earnings of $1.73 on sales of $1.12 billion.
With greater visibility into the future, the company also upped its full-year guidance. Gartner now anticipates 2021 revenue of at least $4.57 billion versus May's guidance of $4.51 billion, translating to a minimum of 11% growth from 2020. The per-share profit outlook was raised from a previously forecast minimum of $6.25 to at least $7.60 for the current year, or 55% better than last year's earnings. Analysts are -- or at least were -- modeling for a more modest $6.42 per share.
The company is clearly on the right track, pushing through whatever adverse impact the pandemic has had on it. For this reason alone, Gartner is a compelling stock prospect, and the investment thesis is made even more bullish by the fact that analysts on average have set a price target of more than $300 per share versus the stock's present price near $292.
The bullish thesis fades, however, in light of the stock's incredible and even dangerous run-up this year.
Gartner shares are now up more than 250% from last March's low, qualifying it as one of the market's biggest large-cap winners over that time frame. It's now trading at 38 times this year's company-projected profits, which isn't unheard of, but is still relatively unusual for a corporation that typically grows its bottom line at an annual pace of between 10% and 20%. Analysts clearly aren't worried, but the analyst community also typically doesn't worry about the types of price volatility that most retail investors can't afford to ignore.
Bottom line? This stock may well be en route to higher highs over the long term, but there's a very good chance shares will trade much lower in the near future first. It might be wise to hold off for a while and let any pullback for this technically overbought ticker play out before jumping in.