PagerDuty, Inc. (NYSE:PD) shares were initiated with a Buy rating and $30 price target by BofA analysts on Thursday, reflecting a potential 34% upside in the stock.
The investment bank stated the company is a turnaround story and that tough decisions have been made, the company's strategy is in place, and it is ready to execute.
"Recent macro-related challenges have pressured revenue growth, and the stock trades at a 43% discount to infrastructure software peers (4.3x EV/CY24E revs vs 7.6x), but we think PD is poised to outperform as it improves execution and accelerates growth over the next 12 months," analysts at BofA stated.
"With PD down 15% YTD (vs +42% for NASDAQ) from slowing billings growth due to macro headwinds, we think this creates an attractive 2024 catchup setup from: 1) a compelling turnaround story powered by improved growth and profitability potential (+12pts FCF margin expansion in FY24); and 2) right-sizing of operations throughout CY2023, and new c-suite additions (new CIO, CMO, etc.) which levels up the team to execute the strategy to drive better revenue growth, efficiencies, and higher cash flow," the analysts added.
BofA also cited the company's attractive total addressable market, which they believe can expand to $32 billion by 2028, as well as PD's solid brand and subscription model and attractive risk/reward profile as reasons for its bullishness on the stock.