The general market selling in tech stocks and concerns over economic growth weighed on PagerDuty (NASDAQ: PD) stock. The stock of PagerDuty, which provides a digital operations management platform, has fallen about 50% from its 52-week high.
While PagerDuty stock has lost a considerable value, it continues to deliver solid and consistent financial and operating performance.
For context, PagerDuty’s top line has consistently increased on a year-over-year basis and sequentially in the last several quarters. Further, its top line has grown by more than 30% in the last four consecutive quarters.
What’s more? Its dollar-based net retention remains high (more than 120% in the last six consecutive quarters).
It’s worth mentioning that PagerDuty continues to acquire high-value customers, which is a positive. Its customers with annual recurring revenue over $100K reached 655 at the end of Q1 from 458 in the prior-year period. Moreover, its total paid customers increased to 15,040 from 13,918 in the year-ago period.
Now What?
Thanks to the ongoing momentum in its business, PagerDuty raised its full-year revenue outlook. It now expects its top line to grow by 29-31% in FY23, up from its previous growth guidance of 24-26%. Meanwhile, PagerDuty now expects to report an adjusted loss in the range of $0.21 to $0.17 per share in FY23, which compares favorably to its earlier net loss guidance of $0.43 – $0.36 a share.
While PagerDuty’s business is growing fast, its valuation appears attractive.
Highlighting PD’s valuation, William Blair analyst Matt Stotler stated, “PagerDuty’s shares trade an enterprise value of 7.4 times our calendar 2022 revenue estimate compared to the fast-growth SaaS group median at 9.6 times and the overall SaaS group median at 7.8 times. On a calendar 2023 basis, the stock trades at 5.7 times our revenue estimate compared to the fast-growth SaaS group median at 7.3 times and the overall SaaS group median at 6.1 times.”
Stotler believes PagerDuty’s “strong positioning and relative growth rate warrant a multiple more in line with the group.”
Final Thoughts
The ongoing digital transformation, its growing international footprint, ability to acquire new customers, and land and expand strategy provide a solid platform for growth. Meanwhile, PagerDuty completed the acquisition of Catalytic, which will further strengthen its enterprise offerings and boost its automation capabilities.
Due to the uncertain economic trajectory, PagerDuty stock sports a Moderate Buy consensus rating on TipRanks based on five Buy and two Hold recommendations. Further, the analysts’ average price target of $36.67 indicates 46.6% upside potential over the next 12 months.
PD stock has bullish indicators from hedge funds, insiders, and bloggers. Overall, PD stock has an impressive Smart Score of 9 out of 10.
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