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Why PagerDuty Stock Rose 25.8% in May

By Billy Duberstein – Jun 6, 2020 at 3:30PM

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The cloud-based incident response software company had a nice run as investors bet on enterprise digital transformation.

What happened

Shares of PagerDuty (PD -2.38%) rose 25.8% in May, according to data from S&P Global Market Intelligence. The company didn't report its fiscal first-quarter earnings until last week in June, and there wasn't very much company-specific news during May. Thus, it appears that May's rise was due to overall optimism in the market, especially for companies that help with enterprise digital transformation.

Viewed from the back, a devops engineers sits in front of various desktop screens in what looks lie a control room.

Image source: Getty Images.

So what

In its annual report, PagerDuty describes itself as the "central nervous system for the digital enterprise."  PagerDuty's tech solutions sits on top of a company's various IT systems, from data centers to databases, cybersecurity software, network, applications, and others. Its solutions offer real-time and automated responses to incidents among any of a company's systems to quickly identify problems and fix them.

With more and more companies advocating a work-from-home system, and with customers accessing products and services digitally amid the COVID-19 outbreak, making sense of an enterprise's various systems and identifying potential problems is more important than ever. That could mean more demand for PagerDuty's products.

That was confirmed by the May expansion of PagerDuty's third-party consulting partner program, including Carahsoft, Estuate, Kinect Consulting, and vCORE. The onboarding of these new reseller partners signals strong demand and the necessity for companies of all sizes to transform their businesses for the digital age.

Now what

After the strong month of May, PagerDuty's first-quarter earnings report sent the stock down. Though the company's 33.5% revenue growth and adjusted loss per share came in ahead of analyst expectations, management's guidance apparently left investors wanting, even as the company's new 2021 guidance is relatively in line with expectations.

After the big run-up during the previous month, merely hitting numbers, and not surpassing them by a material amount, wasn't enough for this new-age tech company hold all of May's big gains. 

Billy Duberstein has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool owns shares of and recommends PagerDuty. The Motley Fool has a disclosure policy.

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