PagerDuty (NYSE:PD) is turning heads with a 10% surge in the stock over the past month following earnings posted that exceeded expectations. The company’s strong performance also included a 10% year-on-year increase in recurring revenue and a healthy operating margin of 14%, indicating that the company is back on a growth trajectory with a robust pipeline and new products. The stock trades at a discount to industry peers, making it a compelling value option with growth potential.
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PagerDuty Is Experiencing Robust Customer Growth
PagerDuty is a leading provider of digital operations management. The platform merges machine-generated data with human response details, facilitating real-time issue identification and resolution.
The company has experienced growth in various segments. Over the first quarter, free and paid customers exceeded 29,000, with a year-over-year increase of about 18%. Those that comprise accounts with annual recurring revenue over $100,000 expanded by 6%.
In addition to its financial growth, the company has made strides in product development and client relations. It has announced AI and automation enhancements to its platform, launched a new enterprise offering, and attracted significant clients, including Cisco Systems (CSCO), DataDog (DDOG), and Equinix (EQIX).
Recent Financial Results and Outlook
PagerDuty has released its first quarter results for the Fiscal year 2025. The company reported revenue of $111.17 million, increasing by 7.7% year-over-year, though slightly missing analysts’ expectations of $111.45 million. Non-GAAP operating income stood at $15.3 million, with a non-GAAP operating margin of 13.8%. Earnings per share (EPS) of $0.17 surpassed analysts’ estimates of $0.13.
PagerDuty’s cash, cash equivalents, and current investments totaled $592.8 million as of the quarter end. In May, the Board of Directors approved a $100 million stock repurchase plan to acquire shares on the open market at current market prices or through off-market negotiated transactions through May 2026.
Management has also given guidance for Q2 and the fiscal year. The company anticipates total revenue for the quarter between $115.5 million and $117.5 million, reflecting a year-over-year growth rate of 7%-9%. The non-GAAP net income per diluted share attributable to common stockholders is projected to be $0.16-$0.17. In terms of the full Fiscal year of 2025, the company expects total revenue ranging between $471.0 million and $477.0 million, suggesting a year-over-year growth rate of 9%-11%. The non-GAAP net income per diluted share is also predicted to be within $0.66-$0.71.
What Is the Price Target for PD Stock?
Analysts following the company have been cautiously optimistic about the stock. For example, Scotiabank analyst Nick Altmann recently initiated coverage of PagerDuty with a Sector Perform rating and a $23 price target. He noted the company has expanded its total addressable market and fostered cross-selling capabilities.
Overall, PagerDuty is rated a Moderate Buy based on the recommendations and price targets recently issued by 12 analysts. The average price target for PD stock is $25.22, representing a potential upside of 15.74% from current levels.
The stock has been highly volatile, with a beta of 1.78, though mostly range-bound the past year. It trades in the middle of its 52-week price range of $17.92 – $26.70 and shows positive price momentum, trading above its 20-day (21.56) and 50-day (21.20) moving averages. With a P/S ratio of 4.6x, it appears relatively undervalued to peers in the Software Application industry, whose average P/S ratio is 6.85x.
PD Stock in Summary
With a 10% year-over-year increase in recurring revenue, a respectable operating margin of 14%, and a discount stock price, PagerDuty presents a compelling value proposition with growth potential.
