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Investing.com -- Bank of America cut PagerDuty to Underperform given soft demand, renewal pressure and a pricing model shift that could weigh on growth metrics for several quarters.
The brokerage set a $12 price target and said sentiment is likely to stay constrained until billings, net revenue retention and total revenue stabilise.
PagerDuty trades at 7x estimated 2026 free cash flow versus 31x for infrastructure software peers, but sees few catalysts to close the gap.
BofA said the biggest negative surprise is seat reductions during renewals as customers face budget pressure and layoffs. Billings declined 0.1% year on year and net revenue retention slipped two points to 100%.
With a heavy fourth quarter renewal cycle ahead, it said visibility remains low even with implied billings guidance pointing to a 7% decline.
PagerDuty is also shifting to a usage based, multi year pricing model from its historical seat based structure. BofA said this could support long term growth but introduces execution risk as customers adjust.
The firm said earlier press reports about strategic interest in PagerDuty have not been followed by any developments and believes the stock is trading back on fundamentals.
“Facing demand headwinds, a pricing model change, and an impending CFO transition, we think it could take multiple quarters for stabilization in key growth metrics, which could constrain investor sentiment and drive relative underperformance versus infrastructure software peer,” analysts at BofA said.