By Emily Bary
PagerDuty answered the call, delivering a beat-and-raise quarter in its first earnings report as a public company.
Shares of PagerDuty were up nearly 10% in Friday afternoon trading, after the enterprise-software company /zigman2/quotes/210571191/composite PD +3.71% beat expectations on the top and bottom lines and added more customers than expected.
“We continue to like how PagerDuty is capitalizing on the digital transformation trend,” wrote JPMorgan’s Sterling Auty, who has an overweight rating on the stock and a $60 target price. “All verticals showed strength, with management specifically pointing out the momentum in the financial services industry.”
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PagerDuty picked up 468 new customers in its April quarter, coming in ahead of the 340 that JPMorgan had projected. Auty also highlighted the company’s international business, with revenue up 63%, which he expects to be “a key to growth on the back of incremental investments.”
Morgan Stanley’s Keith Weiss dubbed PagerDuty’s first report “a successful kickoff,” as revenue growth accelerated to 49% and gross margins improved. “Furthermore, the IPO looks to have improved PagerDuty’s brand awareness, as the company added the most customers in over two years,” he wrote.
The results weren’t enough to move Weiss off the sidelines, however, as he reiterated his equal-weight rating while bumping his target price up a buck, to $48. Weiss argued that shares look fully valued trading near 19 times estimates for 2020 revenue. “We think strong fundamentals are mostly accounted for at current levels,” he said.
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KeyBanc’s Rob Owens took a similar view. “We remain fans of the PagerDuty story, given what we see as meaningful runway in its core markets plus significant upsell opportunity in seat expansion as well as cross-sell of additional modules,” he wrote. “That said, we are neutral on the stock, merely as we believe much of the good news and optimism is baked in at this valuation.”
Owens has a sector weight rating on the shares.
Of the seven analysts tracked by FactSet who cover PagerDuty’s stock, three have buy ratings and four have hold ratings. The average price target listed on FactSet is $54.25, 5% above current levels.
PagerDuty shares jumped almost 60% in their first day of trading in mid-April, and they’ve proceeded to head higher. The stock is up more than 110% from its offering price of $24. It’s gained 6.3% over the past month, as the S&P 500 /zigman2/quotes/210599714/realtime SPX +1.00% has fallen 0.2%.