Morgan Stanley Presents Highlights From PagerDuty Investor Meetings

Although PagerDuty Inc PD has new initiatives in place to boost productivity of new sales hires amid a complex infrastructure landscape, the performance of its stock would depend on stabilization of expansion rates in fiscal 2021, according to Morgan Stanley.

The Analyst

Morgan Stanley's Sanjit Singh maintained an Equal-Weight rating for PagerDuty, keeping the price target at $31.

The Thesis

During the investor meetings, PagerDuty’s CEO and CFO explained the company's overall value proposition, differentiating it from providers of monitoring and IT service management solutions, Singh said in the note.

He added that it was this differentiation that resulted in PagerDuty enjoying a low churn rate of below 5% on an annual basis.

Management addressed the issue of PagerDuty’s net expansion rate in recent quarters, suggesting that this did not reflect loss to competition and was a result of lower productivity from newer sales hires, the analyst said. He added, however, that the loss of Atlassian and Splunk as customers could impact PagerDuty’s expansion rate until the second quarter for 2021.

The company had implemented several initiatives to improve onboarding, training, sales enablement and the sale process, Singh mentioned.

The analyst recommended to wait for “clearer signs on the timing of stabilization in the expansion business and on sales productivity improvements to get more bullish.”

Price Action

Shares of PagerDuty had risen more than 3.14% to $25.00 at the time of publishing Wednesday.