PagerDuty’s PD software solutions help firms pinpoint technical problems and quickly address them. PD shares jumped over 6% on Monday, in a sign that investors might expect big things from its second quarter fiscal 2021 financial results that are due out after the closing bell on Wednesday, September 2.
PagerDuty’s pitch to clients is that it will act as the “central nervous system for your digital ecosystem.” The company, which went public in April 2019, helps analyze 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 both internally and customer-facing is critical to companies big and small at a time when infrastructures have to be operating as close to 100% as possible all the time. The company also boasts that it helps empower its customers to capitalize on opportunities like spikes in traffic.
PD is part of the larger DevOps space that’s projected to jump from $3.4 billion in 2018 to $10.3 billion by 2023. With this in mind, PagerDuty has scooped up some well-known clients, including hot tech growth names like Zoom ZM and Shopify SHOP. The firm’s customers with $100K or more in annual recurring revenue climbed 44% in the first quarter to roughly 350.
Overall, PagerDuty closed the three-month period ended on April 30 with over 13,000 customers, including recently added names like Nvidia NVDA, NBCUniversal, Domino’s Pizza DPZ, and others. PD also topped our Q1 estimates in June, with revenue up 33% and its adjusted loss down from -$0.22 in the year-ago period -$0.04 a share.
Like many software firms, PagerDuty has climbed during the market’s tech-driven comeback off its March lows. PD stock is up over 150% since mid-March and 15% in the last week.
Despite its run, PD sits around 40% below its all-time highs that it hit back in June 2019. And it’s trading at a far more reasonable forward sales multiple at 10.3X forward 12-month Zacks sales estimates, compared to its year-long high of 15.7X.
PagerDuty’s balance sheet is solid, having closed the quarter with $351 million in cash, equivalents, and current investments against $159 million in total liabilities.
Moving on, our current Zacks estimates call for PagerDuty’s Q2 FY21 revenue to climb 26%. Peeking further ahead, the firm’s full-year sales are expected to jump another 25% in FY21, with FY22 set to climb 22% higher to come in at $252.5 million.
The company is also expected to see its adjusted losses shrink in Q2, FY21, and FY22. It’s also worth noting that its earnings revisions have trended higher, and it easily beat our bottom-line estimate in trailing two periods.
PagerDuty is a Zacks Rank #3 (Hold) at the moment that sports a “B” grade for Growth and an “F” for Value in our Style Scores system. This helps highlight that only growth-focused investors should likely want to take a chance on the digital operations management firm.
It is also likely prudent to wait until after it reports and provides updated guidance. Yet those with longer-term investment horizons don’t need to try to time things so precisely. Therefore, some might want to consider buying PagerDuty since its services are likely to remain mission-critical for years to come, and PD has miles to run before it hits its previous highs.
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