PagerDuty Inc. shares finished higher Monday as analysts started coverage of the DevOps company’s stock less than a month after it started trading, with the split among buys and holds appearing to be an opinion of how much growth the stock’s doubling in a month is already priced in.
shares closed up 5.7% at $49.04, compared with 0.5% declines for both the S&P 500 index
and the tech-heavy Nasdaq Composite Index
In mid-April, PagerDuty shares surged nearly 60% on their first day of trading, and are 104% above their initial public offering price of $24. By comparison, the S&P 500 is up 1.5% and the Nasdaq is up 2.2% since PagerDuty’s IPO.
By Monday, seven analysts were covering PagerDuty, three with buy ratings and four with hold ratings, and an average price target of $48.45, according to FactSet data.
PagerDuty offers a subscription service that allows businesses to improve the constant interplay between software developers and operators — so-called DevOps — within their organization and lets them use real-time data to address incidents that occur. Competitors include Atlassian Corp.’s
OpsGenie and Splunk Inc.’s
BTIG analyst Joel Fishbein, who has a neutral rating on the stock, said he expects north of 30% growth at PagerDuty “for many years,” but said he is “watching closely for a pullback as an entry point” given the stock’s impressive run in less than a month.
Morgan Stanley analyst Sanjit Singh, who has an equal-weight rating and a $47 price target, also said PagerDuty growth opportunity “looks priced in.”
“We believe valuation levels currently assume significant outperformance relative to our estimates resulting in a more balanced risk/reward,” Singh said
Singh also noted that with Atlassian and Splunk, “larger, multi-product competitors may create better integrations (service desk is a key integration point) between their existing products,” so “the competitive environment will likely remain a key area of focus for investors going forward.”
RBC analyst Matthew Hedberg, who has a sector perform rating and a $47 price target, also addressed PagerDuty’s competition with Atlassian and Splunk.
“As PagerDuty expands their offerings beyond IT on-call management, we believe they have the opportunity to be a multi-product platform vendor,” Hedberg said.
Piper Jaffray analyst Alex Zukin, who has an overweight rating and a $52 price target, said PagerDuty is well positioned for “a very large DevOps market opportunity.”
“If software is eating the world, then PagerDuty makes sure the patient has around-the-clock care and doesn’t fall victim to indigestion,” Zukin said.
“Outside of on-call management, PD’s products are workflow-based solutions geared toward keeping customer-facing software applications running,” Zukin said. “With the product platform’s flexibility to broadly integrate with, and ingest data from, a diverse set of business applications and intelligently route that information based on context in real time, PD’s solutions are incredibly valuable.”
William Blair analyst Bhavan Suri, who has an outperform rating, said he still sees upside in PagerDuty.
“With shares trading at an enterprise value of 17.9 times our calendar 2020 revenue estimate, we believe potential for upside could be driven by upward revisions to estimates, and to a lesser extent, multiple expansion,” Suri said.