BofA Securities has adjusted its outlook on PagerDuty (NYSE:PD) shares, reducing the price target to $23 from the previous $28, while still recommending a Buy.
Despite PagerDuty's second-quarter revenue falling short of expectations, the firm acknowledged the company's stronger-than-anticipated non-GAAP operating income.
PagerDuty reported quarterly revenue of $115.9 million, which did not meet the forecasted $116.4 million by BofA Securities and $116.6 million anticipated by the broader market. On a positive note, the non-GAAP operating income reached $20.1 million, surpassing both BofA Securities and market estimates, which were set at $15.1 million and $15.4 million, respectively.
Looking ahead, PagerDuty has revised its total revenue guidance for the year 2024 downward to a range of $463 million to $467 million, a reduction from the previous projection of $471 million to $477 million. This updated guidance falls below the prior estimates of $473.8 million by BofA Securities and $474.2 million by market consensus.
The firm noted that while there was encouraging commentary about the enterprise segment, the timing of deal closures and ongoing difficulties within the small to medium business (SMB) segment are impacting the company's growth expectations. Despite these challenges, BofA Securities sees PagerDuty's current trading at approximately 3 times enterprise value to CY25E sales as presenting an attractive risk/reward scenario.
In other recent news, PagerDuty exceeded analyst expectations by posting an adjusted earnings per share of $0.21, compared to the anticipated $0.17. However, its revenue growth of 7.7% YoY, amounting to $115.9 million, fell slightly short of the projected $116.51 million. JPMorgan (NYSE:JPM) and Goldman Sachs (NYSE:GS) both adjusted their outlook on PagerDuty, reducing their price targets to $21 while maintaining a neutral stance.
The lower revenue and billings were attributed to macroeconomic challenges and pressures in the small and medium-sized business segment. Despite this, PagerDuty's operating and free cash flow margins surpassed anticipated performance metrics. In response to the changing landscape, the company has shifted towards a more enterprise-focused sales strategy, which has altered the timing of revenue recognition.
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