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Why Gartner Stock Popped on Tuesday

By James Brumley – Nov 2, 2021 at 1:26PM

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The IT market research company aced another quarter, though the stock's rally potential appears to have run its full course...at least for the time being.

What happened

Shares of technology market research and consulting outfit Gartner (IT 1.48%) are higher by more than 4% as of mid-session today, though at one point were up as much as 12.3%. The surge stems from an impressive third-quarter earnings report and equally impressive guidance.

So what

For the three-month stretch ending in September, Gartner turned $1.16 billion in revenue into a per-share operating profit of $2.06. Sales improved a little more than 16% year over year, and earnings more than doubled compared with the COVID-crimped comparable quarter from a year earlier. Analysts were only calling for income of $1.56 per share, and a top line of $1.14 billion.

Businessman plotting a rising digital stock chart.

Image source: Getty Images.

Perhaps the day's big bullish driver, however, is the company's updated outlook for the full year. Gartner is now looking for 2021 revenue of $4.66 billion versus its previous guidance of $4.57 billion, and the company upped its full-year profit outlook from $7.60 per share to $8.54. Analysts are (or were) only modeling earnings of $7.80 per share on sales of $4.63 billion.

Now what

It comes as no real surprise that Gartner continues to grow its top and bottom lines. The world needs help navigating ongoing changes to a huge array of technologies. This company offers it.

Stepping into a new position in Gartner right now, though (particularly after today's surge), poses a great deal of risk with not a lot of reward. Shares were already up 180% from last October's low as of yesterday's close, with today's intraday high translating into a tripling in value in just a little over a year. That doesn't leave a lot of room for more upside. In fact, Tuesday's pullback from an intraday high and the gap the stock left behind at this morning's open could be an invitation to the profit-taking that's arguably long overdue.

At the very least, would-be buyers will want to wait and see how the market responds to today's action before diving in.

James Brumley has no position in any of the stocks mentioned. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.

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