Canaccord Genuity lowers PagerDuty stock price target to $21

On Monday, Canaccord Genuity analysts adjusted their outlook on PagerDuty stock (NYSE: NYSE:PD) by reducing the price target to $21 from a previous $23, while maintaining a Buy rating. This revision comes as the stock trades near its 52-week low of $13.94, having declined over 34% in the past six months. According to InvestingPro analysis, the company appears undervalued at current levels, with strong fundamentals including an impressive 83.33% gross profit margin.

The analysts noted that there remains potential for growth in fiscal year 2026, particularly if small and medium-sized business growth improves consistently and large enterprises continue to enhance PagerDuty’s strategic role in their IT operations. They highlighted that PagerDuty’s profitability has shown positive trends in recent quarters, with expectations of achieving 25% operating margins annually within the next three years. This aligns with InvestingPro data showing the company maintains a healthy current ratio of 2.02 and is expected to achieve profitability this year.

The valuation adjustments were based on a projected enterprise value to revenue multiple of approximately 3.5 times for calendar year 2026, compared to the previous estimate of around 4 times for calendar year 2025. Additionally, the free cash flow valuation was set at 15 times.

The analysts reiterated their Buy rating for PagerDuty, emphasizing that the current valuation provides a favorable cushion as the company gains traction. They expressed optimism about the company’s growth trajectory and profitability improvements in the coming years.

In other recent news, PagerDuty reported its first-quarter earnings for fiscal year 2026, surpassing expectations with an earnings per share (EPS) of $0.24 against the forecasted $0.19, and revenue slightly exceeding forecasts at $119.8 million. Despite these positive results, the company reduced its fiscal year 2026 revenue guidance by 1.5%, influenced by a deceleration in net revenue retention and challenges in sales execution. Analysts from various firms have adjusted their price targets for PagerDuty, with TD Cowen cutting it to $17, RBC Capital to $20, Goldman Sachs maintaining a target of $16, and JPMorgan reducing it to $18, each citing different challenges the company faces.

PagerDuty’s annual recurring revenue (ARR) fell short of consensus estimates by 1.2%, reflecting higher churn rates in both the Commercial and Enterprise segments. The company has taken steps to address these issues, including appointing a new Chief Revenue Officer and restructuring its sales strategy to focus more on enterprise sales. Analysts remain cautiously optimistic, with RBC Capital maintaining an Outperform rating, noting PagerDuty’s impressive margin leverage, while others like JPMorgan maintain an Underweight rating due to subdued forward-looking metrics.

Despite these challenges, PagerDuty’s customer base has grown, with a record number of paid net customer additions since the second quarter of fiscal year 2023. The company is also focusing on expanding its product offerings, particularly in AI and automation, to drive future growth. Management remains confident in achieving GAAP profitability by fiscal year 2027, supported by ongoing improvements in operational efficiency and strategic capital allocation.

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