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1 Cathie Wood Stock With 42% Upside Potential
San Francisco-based Pagerduty (PD) is a software as a service (SaaS) company, offering the PagerDuty digital operations management program to provide wireless application solutions to its clients. It collects data and digital signals from any virtually enabled software system, and mixes it with human response data - allowing it to predict opportunities and issues in real-time. Serving over 700 integrated applications, Pagerduty boasts a customer network of over 25,000 companies spread across the U.S., Canada, Australia, and the UK.
Currently valued at just over $2 billion by market cap, Pagerduty stock has been underperforming most of the year. The stock is down nearly 9% on a YTD basis, and has dropped more than 20% from its mid-January peak.
However, PD stock has spiked more than 17% off its late-May lows following a well-received Q1 earnings report.
Pagerduty Rallies After Earnings
The IT company posted its Q1 results after the close on May 30, with revenue totaling $111.2 million, falling short of analysts' expected $111.7 million. However, Pagerduty swung to an adjusted profit of $0.17 per share for the period, crushing expectations for $0.13 per share.
Annual recurring revenue (ARR) grew 10% during the quarter, as billings climbed by 11.2% YoY to $106.7 million. Pagerduty's customer base increased by 81, taking the total to 15,120.
Q1 operating margin of 14% came in stronger than forecast, and Pagerduty's free cash flow rose 38.2% during the quarter to $27.1 million.
Pagerduty's board also approved a $100 million share buyback, which the company says is intended to help manage share dilution as it looks well-positioned to keep generating healthy cash flow.
For the current quarter, management expects the company to post revenue between $115.5 million to $117.5 million, while reaffirming its full-year guidance of $474 million. Q2 non-GAAP income is expected to be around $0.16 to $0.17 per share, while full-year EPS is projected between $0.66 and $0.71.
Wood Stocks Up on Pagerduty
Ark Invest boss Cathie Wood has been actively buying shares of PD, which is a holding in her flagship Ark Innovation ETF (ARKK).
The fund manager currently holds about 8 million shares of Pagerduty, making it the No. 12 holding in the ARKK ETF by weight, at 2.76%. Wood made her most recent purchases after PD's quarterly earnings report.
How is PD Stock Rated by Wall Street Analysts?
Pagerduty has a consensus “Moderate Buy” rating on Wall Street. Currently, 10 analysts are tracking the stock, and 5 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 4 have a “Hold” rating.
The mean price target for PD is $26.25, indicating an upside potential of 24% from current levels. The Street-high price target of $30, courtesy of a recent boost from analysts at Craig-Hallum, implies an expected premium of 42.2%.
That new Street-high price target coincided with an upgrade at Craig-Hallum, as the brokerage simultaneously raised its rating on PD to “Buy” from “Hold.”
"Far from taking the Enterprise headwinds sitting down, the team has made meaningful progress in the business," wrote analyst Jeff Van Rhee in a note accompanying the upgrade.
Van Rhee, who predicts "accelerating top line growth in H1 and a more compelling position for the company long term," also noted that Pagerduty stock looks cheap at current levels. “We believe the current discount to peers is not appropriate and see that gap closing. Our price target of $30 is based on a 27x FCF or 4.9x revenue multiple,” said the analyst.
On the date of publication, Ruchi Gupta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
