PagerDuty, Inc. (NYSE:PD) was cut to Equal Weight from Overweight at Morgan Stanley on Wednesday, with analysts maintaining a $30 per share price target for the stock.
The analysts explained that the bank's upgrade of the stock last January was based on the view that while growth would likely slow, PagerDuty would deliver an attractive blend of growth and profitability.
However, "while PagerDuty is delivering on its profitability ambitions with margins expected to be up over 1,000 bps in FY24, top-line has been weaker than we expected," wrote the analysts.
"With NRR expected to fall below 110% and TTM billings expected to slow to 10% in Q4, we think initial FY24 rev guidance will be in the low-double digits," they added.
Furthermore, Morgan Stanley sees the PD approaching fair value based on recent take-private transactions in the IT operations market.
"While we think growth will ultimately improve, recovery will likely lag cloud infra peers given PD's seat-based model," the analysts concluded.