How to Play PD Stock as PagerDuty Lays Off 15% of Its Staff

PagerDuty (PD) stock is pushing higher on Friday after the digital-operations software firm posted market-beating Q2 results and unveiled a major restructuring designed to improve profitability.

In its earnings release, PD’s management said it plans on laying off about 15% of its workforce, primarily from non-customer-facing roles.

Following today’s rally, PagerDuty shares are up more than 5% versus the start of this year. 

Significance of the Layoffs for PagerDuty Stock

Investors are treating the layoff announcement as bullish because management said it is intended to prioritize sales and engineering investments while generating significant run-rate savings.

The timing is important because PagerDuty’s second-quarter revenue increased just 1% year over year to $124.4 million, highlighting the need for tighter cost control.

Plus, the cost savings could help boost PD’s margins, which already stood at an attractive 24% in the second quarter. 

In fact, the company raised its full-year FY2027 operating-margin outlook to 25%-26% today. 

From a technical perspective, PD shares now sit handily above their major moving averages (MAs), with an RSI in the early 70s indicating intense buying pressure. 

Cantor Fitzgerald Raises Price Target on PD Shares

PagerDuty’s better-than-expected financials and restructuring plans made Cantor Fitzgerald analysts raise their price target on the software stock to $15. 

The upwardly revised price target signals potential for another 10% rally from current levels. 

In its research note, the investment firm cited the strength in PD’s recurring revenue that crossed the $500 million threshold in the second financial quarter, despite an overall revenue growth of about 1% only. 

According to its analysts, the combination of sluggish sales growth being offset by solid profitability and cash generation provides investors with a potentially attractive setup. 

Wall Street’s View on PagerDuty

Heading into Aug. 28, Wall Street had a consensus “Moderate Buy” rating on PagerDuty stock with a mean price target of about $10.79. 

However, it’s reasonable to assume that upward revisions like that of Cantor Fitzgerald will follow as investors attempt to bake in PD’s market-beating quarter and raised operating margin guidance in their estimates. 

On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.