Thursday, Canaccord Genuity (TSX:CF) adjusted its price target for Braze Inc (NASDAQ:BRZE), a customer engagement platform, dropping it to $65 from the previous $70, while maintaining a Buy rating on the stock.
The adjustment follows Braze's fourth fiscal quarter report, which showcased revenue surpassing the upper end of its guidance by $6 million and a year-over-year increase of 33%, with 30% organic growth. The company's calculated remaining performance obligations (cRPO) grew by 31%, consistent with the previous quarter and an uptick from the first half of fiscal year 2024.
Braze achieved its goal of an operating loss better than 6% for the quarter, aligning with the mid-point of its guidance. The management highlighted strong performance in enterprise and expansion efforts, evident in the significant customer additions within the $500,000+ annual contract value (ACV) group. This includes a milestone expansion leading to Braze's first eight-figure customer.
Additionally, the company noted a deceleration in the decline of dollar-based net retention (DBNR), which ended the quarter at 117%, down just one percentage point from the previous quarter.
Despite these positive developments, Braze experienced a decline in the count of new logos, with 33 net new additions compared to 53 in the previous quarter and 55 in the same quarter last year.
The management provided two reasons for this trend: firstly, due to robust upselling activities—such as new business units and geographies—many new bookings are categorized under existing parent companies, which doesn't affect the count of total customers. The management indicated that if one were to consider the number of new order forms, this quarter's performance would be in line with previous ones.
Secondly, Braze is encountering higher levels of churn among small to medium-sized businesses (SMBs), which impacts the total logo count but has a lesser effect on the annual recurring revenue (ARR) due to the smaller contract sizes of these accounts. The company continues to maintain a positive outlook, as reflected in its steady cRPO growth and the achievement of operating loss targets.
InvestingPro Insights
In light of Canaccord Genuity's updated price target for Braze Inc (NASDAQ:BRZE), recent real-time data from InvestingPro provides additional context for investors considering the company's stock. Braze's market capitalization stands at approximately $4.93 billion, reflecting a significant player in the customer engagement platform sector. Despite the company's strong revenue growth of 34.33% over the last twelve months as of Q1 2023, analysts have noted that Braze is not expected to be profitable this year, which is also reflected in the absence of a P/E ratio and a negative adjusted P/E ratio of -37.42. The Price/Book ratio is fairly high at 11.52, suggesting a premium valuation.
From an operational standpoint, InvestingPro Tips highlight that Braze holds more cash than debt on its balance sheet and has liquid assets that exceed short-term obligations, which could provide financial flexibility in the near term. However, the company is trading at a high revenue valuation multiple and a high Price/Book multiple, which investors should weigh against the company's growth prospects and market position. On the positive side, Braze has seen a high return over the last year with a 63.74% price total return, indicating strong investor confidence. It's also worth noting that Braze does not pay a dividend, aligning with many growth-focused tech companies that reinvest earnings back into the business.
For those who find these insights valuable, there are additional InvestingPro Tips available for Braze Inc, providing a deeper analysis of the company's financial health and market position. To explore these further, visit https://www.investing.com/pro/BRZE and consider using the coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription. This code unlocks a wealth of data and insights to help make informed investment decisions.
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