Shareholders will be ecstatic, with their stake up 22% over the past week following PagerDuty, Inc.'s (NYSE:PD) latest yearly results. The results look positive overall; while revenues of US$166m were in line with analyst predictions, statutory losses were 3.1% smaller than expected, with PagerDuty losing US$0.77 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on PagerDuty after the latest results.
Taking into account the latest results, the consensus forecast from PagerDuty's seven analysts is for revenues of US$209.5m in 2021, which would reflect a substantial 26% improvement in sales compared to the last 12 months. Losses are supposed to decline, shrinking 13% from last year to US$0.67. Before this earnings announcement, the analysts had been modelling revenues of US$210.3m and losses of US$0.52 per share in 2021. While this year's revenue estimates held steady, there was also a large cut to loss per share expectations, suggesting the consensus has a bit of a mixed view on the stock.
The consensus price target fell 23% to US$20.33 per share, with the analysts clearly concerned by ballooning losses. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic PagerDuty analyst has a price target of US$29.00 per share, while the most pessimistic values it at US$15.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that PagerDuty's revenue growth is expected to slow, with forecast 26% increase next year well below the historical 41% growth over the last year. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 12% next year. Even after the forecast slowdown in growth, it seems obvious that PagerDuty is also expected to grow faster than the wider industry.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at PagerDuty. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of PagerDuty's future valuation.
With that in mind, we wouldn't be too quick to come to a conclusion on PagerDuty. Long-term earnings power is much more important than next year's profits. We have forecasts for PagerDuty going out to 2023, and you can see them free on our platform here.
You still need to take note of risks, for example - PagerDuty has 3 warning signs (and 1 which is potentially serious) we think you should know about.
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