On Friday, Canaccord Genuity maintained a positive stance on Braze Inc (NASDAQ:BRZE) shares, raising its price target to $53 from $50, while reiterating a Buy rating on the stock.
The adjustment reflects the firm's view that despite ongoing macroeconomic challenges, the company's financial outlook is stable.
Braze, which specializes in customer engagement software, has been navigating a tough economic landscape marked by limited marketing budgets and slower growth in new business. However, Canaccord's analysis indicates that these headwinds have not worsened.
The company's updated forecast for fiscal year 2025 anticipates a 23% increase in revenue, a slight uptick from the previous 21% projection, with the net operating margin remaining steady at negative 4%.
The firm also highlighted Braze's progress toward profitability, noting that the company is expected to achieve positive net operating income and free cash flow by the fourth quarter of fiscal year 2025.
Additionally, while customer growth is projected to slow to around 10% this year, this is expected to be counterbalanced by stable growth in average spend per customer, driven by ongoing upsell opportunities within the enterprise segment.
Canaccord anticipates that the dollar-based net retention rate (DBNR), a key metric that measures revenue retention from existing customers, will stabilize in the mid- to low teens.
There's an expectation for this figure to potentially begin improving in the latter half of the year, signaling a possible positive shift in customer retention and spending.
InvestingPro Insights
As Braze Inc (NASDAQ:BRZE) garners a favorable outlook from Canaccord Genuity, real-time data from InvestingPro offers a comprehensive glimpse into the company's financial status. With a market capitalization of $3.72 billion, Braze holds a notable position in the market. Despite the lack of profitability over the last twelve months, the company's substantial revenue growth of nearly 32.74% in the same period underscores a strong expansion of its business operations. This aligns with Canaccord's positive revenue projections for fiscal year 2025.
InvestingPro Tips indicate that Braze has more liquid assets than short-term obligations, which may provide financial flexibility in the face of economic headwinds. Additionally, with the company trading near its 52-week low, potential investors might find the current valuation an attractive entry point, especially considering that Braze holds more cash than debt on its balance sheet. However, it's important to note that analysts have revised their earnings downwards for the upcoming period, and the company is not expected to be profitable this year.
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