Michael Vi
PagerDuty (NYSE:PD) shares fell nearly 4% on Friday after the cybersecurity company reported third-quarter results and offered up guidance that some on Wall Street described as "weak."
TD Cowen analyst Derrick Wood downgraded PagerDuty (PD) shares to market perform from outperform and cut the price target to $23 from $29, noting that macro pressures are not getting any easier.
"The macro seems to be driving higher churn and growing pressure during renewals," Wood wrote in a note to clients. He cut his fiscal 2025 growth forecast to 10% from 17% following the results.
During the period, PagerDuty (PD), whose platform lets clients know about disruptions and outages, earned an adjusted 20 cents per share as revenue rose 15.4% year-over-year to $108.7M.
Wood said billings growth of just 4% was below the guidance for between 8% and 10% growth, some of which may be due to "high churn" for small and medium-sized businesses. He also pointed to "challenging conditions" in Europe, Middle East and Asia, as well as "elevated" downgrades and down-sells in all segments during renewals.
"Per the latter, it seems that [PagerDuty] is seeing pressure from a slowdown or reduction in developer seats at existing customers, as well as pressure in budgets causing customers to shift less mission-critical incident orchestration workflows to manual processes or low-cost alternatives," he wrote.
Looking ahead, fourth-quarter revenue is expected to be between $109.5M and $111.5M, up between 8% and 10% year over year.
Wood added that while no formal guidance for fiscal 2025 was given, given the weakening in certain key performance indicators in the second half of the year and the -10% growth backdrop in the year, it's likely there will be an "overhang" on valuations in the medium-term.
Analysts are largely cautious on PagerDuty (PD). It has a HOLD rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates PD a HOLD.