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Bull of the Day: PagerDuty, Inc. (PD)

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PagerDuty’s (PD - Free Report) software solutions help companies pinpoint technical problems and address them as quickly as possible. PD, which went public last April, has seen its stock price soar over 140% since mid-March and it topped our first quarter estimates in early June.

On Call

PagerDuty’s central pitch to both clients and investors is that it will act as the “central nervous system for your digital ecosystem.” The company helps analyze digital signals from software-enabled systems in order to help firms identify problems and outages in real-time, which allows for quick and decisive actions to be taken.

The ability to address technical issues both internally and customer facing is critical to companies big and small during an age where a firm’s digital infrastructure has to be operating as close to 100% as possible 24/7. Along with helping discover and solve incidents such as customer complaints, PagerDuty empowers businesses to capitalize on opportunities like spikes in traffic.

PagerDuty has racked up some big-name clients like Allstate, Shopify (SHOP - Free Report) , Zoom (ZM - Free Report) , DropBox (DBX - Free Report) , and more, and it closed fiscal 2020 with over 12,700 customers. Meanwhile, its full-year revenue jumped 41%, and investors should note that it’s part of the larger DevOps market that is projected to jump from $3.4 billion in 2018 to $10.3 billion by 2023.

 

 

 

 

 

 

 

 

 

 

First Pandemic Quarter & Other Fundamentals

PagerDuty topped our Q1 fiscal 2021 revenue estimate on June 4 and reported a smaller-than-projected quarterly loss.

The company cut its adjusted loss from -$0.22 in Q1 FY20 to -$0.04 a share. PD’s revenue climbed 33% to reach $49.8 million for the period ended on April 30. The firm also reached over 13,000 total customers, and now boasts 348 customers with annual recurring revenue over $100,000, up 44% from the year-ago period.

Shares of PD are up nearly 30% since June 11 and 140% since mid-March to top stay-at-home standout Zoom’s 125%, as well as Amazon’s (AMZN - Free Report) 60% and Netflix’s (NFLX - Free Report) 50%. PagerDuty stock has now climbed roughly 33% in 2020, against its industry’s 16%.

Despite the run, PD shares rest 45% below their highs of nearly $55 a share last June, at $31. Therefore, the stock could have plenty of more room to run.

Plus, it’s trading at a far more reasonable forward sales multiple at 10.8X forward 12-month Zacks sales estimates, compared to its year-long high 22.7X. Clearly, its improved valuation picture is partly a function of its lower share price, but the P/S discount is larger and brings it closer to its industry’s 8.4X average.

PagerDuty’s balance sheet is also solid, having closed the quarter with $351 million in cash, equivalents, and current investments against $159 million in total liabilities. PD also currently holds a “B” grade for Growth and an “A” for Momentum in Style Scores system and its industry rests in the top 16% or our more than 250 Zacks industries.

 

 

 

 

 

 

 

 

 

Bottom Line  

PagerDuty’s second quarter FY21 revenue is projected to climb 26%, based on our current Zacks estimates. Peeking ahead, the firm’s full-year fiscal 2021 sales are expected to jump another 25%, with FY22 set to climb 22% higher to come in at $252.5 million.

The digital operations management company is also expected to continue to post smaller adjusted losses and its positive earnings revisions help it grab a Zacks Rank #1 (Strong Buy) right now. Therefore, investors might want to take a chance on PagerDuty, given that its services are likely to remain mission-critical for years to come.  

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