PagerDuty Stock Rides the Digital Operations Management Trend

Digital operations management platform PagerDuty, Inc. NYSE: PD stock has outperformed the technology bear market down just (-18%) on the year. The digital ecosystem management platform enables enterprises to manage and analyze digital applications in real-time using artificial intelligence (AI) and automation to predict future problems before they happen. The digital transformation trend is a powerful growth driver as more companies migrate to the cloud, consolidate its robust data flows, and prioritize cybersecurity. The Company grew its total paid customers to 15,040 from 13,918 in the year-ago period. Dollar-based net retention rate was 126%, up from 121%. Clients with over $100,000 annual revenues grew to 655, up from 458 a year ago. Some notable wins and service expansions in the quarter included Cisco Systems NASDAQ: CSCO,  DocuSign NASDAQ: DOCU, Mattel NYSE: MAT, Shopify NASDAQ: SHOP, and World Market. PagerDuty is the benefactor of long-term tailwinds including digital acceleration, cloud adoption, workflow automation and DevOps transformation. Prudent investors looking for exposure in the digital ecosystem management space can watch for opportunistic pullbacks in shares of PagerDuty.

Q1 Fiscal 2023 Earnings Release

On June 2, 2022, PagerDuty released its fiscal first-quarter 2023 results for the quarter ending April 2022. The Company reported an earnings-per-share (EPS) loss of (-$0.04) excluding non-recurring items versus consensus analyst estimates for a loss of (-$0.08), a $0.04 beat. Revenues grew 34.3% year-over-year (YoY) to $85.37 million beating analyst estimates for $82.67 million. PagerDuty CEO Jennifer Tejada commented, “PagerDuty revenue accelerated in Q1, growing 34% year over year in a sustained demand environment, even as we continue to improve our operating leverage. Our Operations Cloud combines Incident Response, AIOps and Automation to orchestrate and resolve mission critical, time sensitive interrupt work, servicing a large Digital Operations TAM as companies strive for efficiency and productivity. Our teams' dedication to empowering customer success led to continued customer loyalty and expansion while our innovation drives enterprise and mid-market strength. We remain committed to profitability in Q4 FY23 and for the full year FY24. We are confident in our ability to execute and are raising our full year top and bottom line guidance.”

Raised Guidance

PagerDuty issued raised guidance for fiscal Q2 2023EPS of ($0.09) to (-$0.08) versus (-$0.08) consensus analyst estimates on revenues of $87 million to $88 million compared to $87.41 million consensus analyst estimates. The Company sees fiscal full-year 2023 EPS of (-$0.21) to (-$0.17) versus (-$0.21) consensus analyst estimates on full-year revenues of $364 million to $369 million.

Conference Call Takeaways

CEO Tejada noted the 600 basis point YoY improvement is helping PagerDuty towards its goal of full-year profitability for fiscal 2024. She underscored how the Company will continue to capture demand for productivity and efficiency from larger enterprises, which led to raising its top and bottom-line guidance for the year. Growth is being driven by mid-market and enterprise segments as $100,000 annual run rate (ARR) clients rose 43% YoY. PagerDuty is an essential part of its client’s digital infrastructure as they require a platform that automates and orchestrates its digital operations. Digital transformation and cloud initiatives tend to be multi-year projects as digital infrastructures grow in complexity and interdependence. She summed up PagerDuty as the most resilient and trusted digital operations platform with almost 670 integrations. It’s AI-based workflow and insight automation robustly spots time-sensitive incidents to free up capacity and bolster efficiency. Usually customers will typically sign up for its site reliability engineering and upgrade to its Digital Operations products which resulted in its gross client retention rate coming in above 95% for the past five years.

PD Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision read for the price action in PD. The weekly rifle chart rifle chart breakdown bottomed out near the $21.67 Fibonacci (fib) level. The weekly 5-period moving average (MA) is sloping back up at $25.85 and 15-period MA at $28.80 to stall the downtrend. The weekly stochastic is bouncing back up off the 20-band. The weekly 50-period MA sits near the $34.72 fib level. The weekly market structure low (MSL) buy triggered on the breakout through $26.96. The weekly lower Bollinger bands (BBs) sit at $19.59 and upper BBs sit at $39.06. The daily rifle chart is attempting a breakout as the 5-period MA at $25.91 crossed up through the 15-period MA at $25.45. The daily upper UBBs sit at $30.09 as the stochastic rallies through the 50-band. Prudent investors can watch for opportunistic pullback levels at the $25.88 fib, $24.21 fib, $22.86 fib, $21.67 fib, $20.60, $19.67 fib, $18.27 fib, and the $16.87 fib. Upside trajectories range from the $34.72 fib up towards the $28.52 fib level.