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On Monday, Canaccord Genuity adjusted its outlook on PagerDuty (NYSE:), a leading incident management platform, by reducing the company’s price target from $30.00 to $27.00. Despite this change, the firm reaffirmed its Buy rating on the stock. The adjustment came after PagerDuty reported its fourth-quarter results for fiscal year 2024, which showcased revenues near the upper end of the expected range. The company also demonstrated an EBIT margin approximately 150 basis points higher than the guided midpoint.
The fourth quarter’s performance was in line with the trends observed in recent quarters, with the enterprise and mid-market segments driving growth amid ongoing challenges in the small and medium-sized business (SMB) sector. The company’s Dollar-Based Net Retention (DBNR) rate, an important indicator of customer spending over time, saw a decrease to 107% from 110% in the third quarter of fiscal year 2024 and from 120% in the fourth quarter of the previous fiscal year. This decline reflects the pricing pressures across the customer base, even though the DBNR within the enterprise segment continues to exceed the overall rate.
PagerDuty has been actively investing in research and development to create premium features aimed at the higher end of the market. These features include process automation, customer service operations, and artificial intelligence for IT operations (AIOps). These initiatives have been well received by customers, indicating a positive response to PagerDuty’s efforts to innovate and add value to its services.
The company’s strategic focus on expanding its offerings and enhancing its platform is part of its commitment to meeting the evolving needs of its customers. Despite the current headwinds and the reduced DBNR, the maintained Buy rating suggests confidence in PagerDuty’s long-term growth potential and its ability to navigate the competitive landscape.
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