PagerDuty stock price target cut to $20 at RBC Capital

On Friday, RBC Capital Markets adjusted its outlook on shares of PagerDuty (NYSE:PD), reducing the price target from $22.00 to $20.00. Despite this change, the firm kept its Outperform rating on the stock. Currently trading at $14.44, near its 52-week low of $14.29, the stock has drawn mixed analyst sentiment with a consensus rating of 2.46. RBC Capital’s analyst pointed out that the company encountered go-to-market (GTM) challenges, which led to a mixed quarter and outlook. The analyst noted that PagerDuty has demonstrated impressive margin leverage, reflected in its strong gross profit margin of 83.34%.

The company has taken prompt measures to address these challenges, including appointing a new Chief Revenue Officer (CRO). With a healthy current ratio of 2.02 and revenue growth of 8.55%, RBC Capital remains positive about PagerDuty’s broadened opportunity and believes that the company has set itself up for a better second half of 2026 than previously anticipated. InvestingPro analysis suggests the stock is currently undervalued based on its Fair Value calculations.

The analyst’s commentary highlighted that while current estimations have been slightly lowered, there is an expectation for PagerDuty to finish the year strongly and possibly accelerate revenue in the fiscal year 2026. The revised price target reflects these slightly lower estimates and a shift in valuation focus to the calendar year 2026.

PagerDuty, a company specializing in incident response software for IT departments, has been working to correct its course after the GTM challenges. The firm’s analyst remains optimistic about the company’s ability to navigate through these issues and capitalize on its market opportunities in the near future.

In other recent news, PagerDuty reported its Q1 2025 earnings, surpassing expectations with an earnings per share (EPS) of $0.24 compared to a forecast of $0.19. The company achieved revenue of $119.8 million, slightly above the anticipated $119.27 million, marking an 8% year-over-year increase to $120 million. Despite these positive results, PagerDuty’s stock experienced a decline in aftermarket trading. The company maintained a high gross margin of 86% and reported operating income of $24 million, which represents 20% of its revenue.

In addition, PagerDuty’s annual recurring revenue (ARR) reached $496 million, showing a 7% growth. However, the company experienced a deceleration in net revenue retention to 104%, attributed to higher churn rates and challenges in sales execution. Analyst firms Goldman Sachs and JPMorgan have weighed in, with Goldman Sachs maintaining a Neutral rating and JPMorgan reducing its price target from $21 to $18, citing subdued forward-looking metrics. PagerDuty is focusing on enhancing enterprise engagement and monetizing AI products, aiming for GAAP profitability by fiscal year 2027.

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