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On Friday, RBC Capital Markets adjusted its outlook on PagerDuty stock (NYSE:PD), with analyst Matthew Hedberg reducing the price target to $22 from the previous $24, while still maintaining an Outperform rating on the shares. Currently trading at $18.05, the stock sits between analysts’ targets ranging from $18 to $26. According to InvestingPro analysis, PagerDuty appears slightly undervalued based on its Fair Value calculation. The adjustment comes as the analyst acknowledges the company’s mixed financial results and conservative guidance, yet he remains optimistic about the firm’s performance in the second half of the fiscal year 2026.
Hedberg noted PagerDuty’s profitability outperformance and its success in the enterprise sector. The company maintains impressive gross profit margins of 83% and analysts expect net income growth this year. He also highlighted the company’s expanding product portfolio and management’s confidence regarding the latter half of the fiscal year. The analyst suggests that investor comfort with the company’s financial ramp-up in the second half of fiscal year 2026 could be bolstered by solid execution and outperformance in the first half. For deeper insights into PagerDuty’s financial health and growth prospects, InvestingPro subscribers have access to over 30 additional financial metrics and analysis tools.
The long-term operating margin (LT OM) target for PagerDuty was revised upward, from 20% to 30%, indicating RBC Capital’s confidence in the company’s profitability potential. With revenue growth of 8.54% and a market capitalization of $1.63 billion, the company shows promising fundamentals despite current challenges. Hedberg expressed anticipation for an updated long-term operating margin later in the year, which could provide additional insights into the company’s financial trajectory.
In his commentary, Hedberg stated, "We thought the tone was better than the mixed results and outlook, which management termed as prudent." He continued, "We again liked the profitability outperformance, success in the enterprise, expanding product portfolio, and the company’s confidence around the 2H. We’d look for execution/outperformance over 1H/26 to enable investors to gain comfort in the 2H/26 ramp."
As the market processes this information, PagerDuty’s adjusted price target reflects RBC Capital’s assessment of the company’s future performance, taking into account the slightly lowered estimates and the impact of peer multiple compression. Despite the lower price target, the Outperform rating suggests that RBC Capital still sees PagerDuty as a stock that could outpace the overall market or its sector in the near future.
In other recent news, PagerDuty reported its fourth-quarter 2025 earnings, surpassing analysts’ expectations with an earnings per share (EPS) of $0.22, compared to the forecasted $0.16. The company also exceeded revenue projections, reporting $121.4 million against the anticipated $119.69 million. Alongside these financial results, PagerDuty announced a new share repurchase program, authorizing the buyback of up to $150 million of common stock. This move is often seen as a signal of confidence from management in the company’s financial health and future prospects.
Analysts at Truist Securities and Canaccord Genuity have both adjusted their price targets for PagerDuty, with Truist lowering it to $26 and Canaccord to $23, while maintaining a Buy rating. Truist’s Joel Fishbein highlighted the company’s solid fourth-quarter results and strategic initiatives, while Canaccord’s Kingsley Crane emphasized the potential for growth in fiscal year 2026. PagerDuty’s strategic focus on multi-product deals and enterprise sales has contributed to stabilized Annual Recurring Revenue (ARR) growth.
The company’s recent go-to-market adjustments and sales strategy enhancements are seen as positive developments, contributing to its strong financial performance. Investors and market watchers will likely continue to monitor PagerDuty’s performance and the execution of its newly announced share repurchase program, as these developments could have an impact on the company’s stock valuation in the near term.
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