Why PagerDuty (PD) Stock Is Nosediving

Anthony Lee /
2023/06/02 10:02 am EDT

What Happened:

Shares of IT incident response platform PagerDuty (NYSE:PD) fell 17.1% in the afternoon session after the company reported first quarter revenue that narrowly beat analysts' revenue estimates. Earnings per share, gross margin, and free cash flow were ahead of Consensus. However, the revenue guidance was weak. Next quarter revenue guidance came in below Consensus, and the full year revenue guidance also missed and was lowered. It is always a worrisome sign when a company reduces revenue guidance, and in this case, the nearly 5% reduction in full year revenue outlook is a key reason for the stock's move. Profitability outlook was better as the full year EPS guidance came in ahead and was raised to $0.60 - $0.65 (up from $0.45 and $0.50), showing that at least with weaker revenue prospects, the company is prioritizing expense efficiency. It sounds like the macro weighed on results, with cost-conscious customers resulting in longer sales cycles, smaller deal sizes, and lower conversion rates. Overall it was a mixed quarter and it seemed the market was laser-focused on the revenue outlook.

What is the market telling us:

PagerDuty's shares are very volatile and over the last year have had 45 moves greater than 5%. But moves this big are very rare even for PagerDuty and that is indicating to us that this news had a significant impact on the market's perception of the business.

PagerDuty is down 9.55% since the beginning of the year, and at $23.29 per share it is trading 33.4% below its 52-week high of $34.98 from March 2023. Investors who bought $1,000 worth of PagerDuty's shares at the IPO in April 2019 would now be looking at an investment worth $611.76.

Is now the time to buy PagerDuty? Access our full analysis of the earnings results here, it's free.