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On Wednesday, TD Cowen adjusted its outlook on shares of PagerDuty (NYSE:PD), a global leader in digital operations management. The firm revised the price target downward to $19.00 from the previous $23.00 while sustaining a Hold rating on the stock. This adjustment reflects a more cautious stance in anticipation of the company's growth trajectory.
PagerDuty's second quarter revenues hit the lower end of the guidance spectrum, and the full-year revenue forecast was reduced by approximately $10 million. This revision was attributed to a trend towards more evenly distributed enterprise revenue throughout the year and extended sales cycles. Despite these challenges, the company's Annual Recurring Revenue (ARR) maintained a stable growth rate of 10%.
Management's expectations for the second half of the year include a potential reacceleration of growth. The company's Net Revenue Retention (NRR) rate, a key metric indicating the health of recurring revenue streams from existing customers, remained stable at 106%. Expectations are also set for an uptick in NRR during the latter half of the year.
In after-hours trading, PagerDuty's valuation appeared inexpensive, trading at approximately 2.5 times its expected enterprise value to CY25E (Calendar Year 2025 Estimated) Sales. However, TD Cowen suggests that until there is a clear sign of growth reacceleration, the stock's performance may remain limited. The firm's stance indicates a watchful approach as the company navigates through its current challenges and strives for a stronger growth pattern in the future.
In other recent news, PagerDuty, a company specializing in incident management solutions, has seen several adjustments to its stock target following its second-quarter earnings. The company's Q2 earnings revealed a slight miss on revenue expectations and a roughly 2% reduction in the company's forecast.
Scotiabank adjusted its price target for PagerDuty to $18.00 from the previous $23.00, while retaining a Sector Perform rating on the stock. Similarly, Canaccord Genuity revised its price target for the company to $24 from $26, maintaining a Buy rating, following PagerDuty's decision to lower its full-year revenue growth forecast to around 8% year-over-year.
In addition, Baird adjusted its price target for the company to $18 from $22, while maintaining a Neutral rating, after the company posted quarterly earnings that did not meet revenue expectations.
Despite these challenges, PagerDuty reported a quarterly revenue of $115.9 million, which fell short of expectations, but posted a stronger-than-expected non-GAAP operating income of $20.1 million.
William Blair maintained an Outperform rating on PagerDuty, indicating a belief in the company's potential, despite the company's revenue figures and forecast falling short of Wall Street's expectations. Lastly, RBC Capital reduced its price target for PagerDuty to $22.00 from $27.00, despite retaining an Outperform rating.
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