Back to top

Image: Bigstock

Buy Growth Tech Stock PagerDuty Down 25% Before Earnings?

Read MoreHide Full Article

PagerDuty, Inc. (PD - Free Report) shares have destroyed the broader tech space in the last year, up 225% vs. the Zacks Computer and Technology sector’s 88%. Like many high-flyers, from Shopify (SHOP - Free Report) to Nvidia (NVDA - Free Report) , the digital operations management stock got clobbered recently as Wall Street sold tech stocks and sent the Nasdaq into a correction in under a month.

Investors have poured back into tech stocks in the last week, which might mean inflation worries could have been overdone. Perhaps Wall Street was more focused on taking profits on tech stocks that had skyrocketed for the better part of a year.

With this mind, should investors consider buying PagerDuty stock down 25% from its recent highs heading into the release of its fourth quarter fiscal 2021 earnings after the closing bell on Wednesday, March 17.  

What’s PagerDuty

PagerDuty’s central pitch is that it acts as the “central nervous system for your digital ecosystem.” The company analyzes digital signals from software-enabled systems to help its clients identify problems and outages in real-time. This allows for quick and decisive actions to be taken.

The ability to address technical issues internally and customer-facing outages and setbacks is vital to companies big and small at a time when infrastructures have to be operating at 100% all the time. PagerDuty also empowers its customers to capitalize on opportunities like spikes in traffic.

PagerDuty remains on call to help its clients make sure their digital footprints are running in tip-top shape. The company that went public in April 2019 boasts an impressive list of customers, including Cisco (CSCO - Free Report) , Netflix (NFLX - Free Report) , Shopify (SHOP - Free Report) , and other big names.

More Fundamentals

PD is part of the broader DevOps space that is projected  to jump from $3.4 billion in 2018 to $10.3 billion by 2023. The company’s revenue climbed 26% in Q3. Perhaps more importantly, its customers with annual recurring revenue of over $500K climbed 40% and it now has over 13,500 total customers.

Last year, PD’s revenue jumped 41%. Zacks estimates call for its FY21 revenue to climb 27% to $212 million, with FY22 projected to pop another 24% higher. “Our digital operations plan accounted for nearly three quarters of our net new ARR illustrative of our successful shift from point solutions to the growing importance of our platform as critical infrastructure for our customer's digital transformation,” CEO Jennifer Tejada said in prepared remarks last quarter.

PagerDuty is also projected to trim its adjusted loss from -$0.35 a share to -$0.29, with a similar trend expected next year. PD’s earnings estimates have remained largely unchanged recently to help it land a Zacks Rank #3 (Hold) heading into its release. Meanwhile, five of the nine broker recommendations Zacks has for PagerDuty are “Strong Buys,” with the other four at a “Hold.”

Bottom Line

As we touched on up top, PD is up 225% in the last year. More recently, its shares have climbed 75% in the past six months, which includes its recent fall from its February 12 records. Its recent peak saw it roughly match its post-2019 IPO highs.

PagerDuty closed regular trading Monday at $42.30 a share, as it has surged nearly 25% in a week. This still gives the stock 25% more room to run before it must break through new records above $59 a share. The recent positivity saw PD climb out of oversold territory (below 30) in terms of RSI to sit at 44, which is still below neutral, as it bounced off its 200-day moving average.

Investors might want to consider PagerDuty as a growth-focused tech stock. And it’s worth knowing that PD has traded very heavily around earnings since going public. This includes a roughly 20% post-earnings climb after its Q3 results impressed Wall Street in early December.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.

Click here for the 4 trades >>