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Investing.com -- Bank of America downgraded Pagerduty Inc (NYSE:PD) to "Underperform" from "Buy" on slowing revenue growth and rising competition in the incident management software space. The brokerage also lowered its price target to $18 from $23.
BofA noted that PagerDuty’s core incident response revenue is growing at a slower pace, with annual recurring revenue rising just 4% in 2024 and expected to remain in the mid-single digits for fiscal 2025, which is well below the 29-33% growth seen in previous years.
Competitive pressures, including Datadog’s On-Call product, could further weigh on its lower-tier small and mid-sized business customers, which account for 16% of revenue.
While PagerDuty is expanding into AI-driven operations and customer service tools, BofA cautioned that these new offerings may not be as profitable as its core business and could limit further margin expansion.
The new price target values PagerDuty at 3.2 times its estimated 2025 revenue, a discount to infrastructure software peers, with BofA seeing few near-term catalysts for upside.
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