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Why PagerDuty Just Popped 30% Today
Shares of enterprise software company PagerDuty (PD +34.48%) rallied on Friday, jumping 33.8% as of 3:56 p.m. EDT.
PagerDuty runs a platform that collects data and signals from any software-enabled device, then predicts problems or remediates them as they occur. While this service could benefit from generative AI, the stock had been caught up in the "SaaS-pocalypse" this year, as investors feared AI upstarts disrupting established SaaS vendors.
However, last night's first-quarter earnings call and guidance seemed to put some concerns to rest. Meanwhile, PagerDuty benefited from a relief rally across the software sector today.
Expand
NYSE: PD
PagerDuty
Today's Change
(34.48%) $2.56
Current Price
$10.01
Key Data Points
Market Cap
$570M
Day's Range
$8.69 - $10.01
52wk Range
$5.70 - $18.00
Volume
519K
Avg Vol
2.6M
Gross Margin
85.01%
Paging a big beat
In the first quarter, PagerDuty saw revenue grow 1% to $121 million, while adjusted (non-GAAP) earnings per share grew 33.3% to $0.32. Both figures handily surpassed expectations. For the current quarter, management forecasts slight quarter-over-quarter revenue growth of $122 million to $124 million, with adjusted EPS of $0.29 to $0.31.
While 1% revenue growth doesn't exactly jump off the page, PagerDuty did an excellent job of expanding operating and free cash flow margins. Adjusted operating margins increased 4.3 percentage points, from 20.3% to 24.6%, while free cash flow margins expanded by nearly 10 percentage points, from 24.2% to 34.1%.
With those increased profits, PagerDuty repurchased a boatload of its own stock in the quarter to the tune of $65.5 million. That brought the average share count down by a whopping 15% relative to the year-ago quarter, while still leaving PagerDuty with a strong balance sheet, with cash and equivalents of $440 million against $396 million of convertible notes.
Image source: Getty Images.
Pagerduty still doesn't look expensive
For the year ahead, PagerDuty expects $488.5 million to $496.5 million in revenue and adjusted EPS of just $1.27 to $1.32. Even after today's jump, the stock is only trading around around 7.5 times that forward adjusted EPS guidance.
On the one hand, there is a good reason PagerDuty is so cheap: its revenue growth rate has basically slowed to a halt, and even this year's revenue estimates are flat with the prior year. So, there are legitimate questions about the competitiveness of its solutions.
Yet with the stock as cheap as it was heading into earnings, it's no surprise that even a slight beat and better cash flow generation was enough to catapult shares higher.