On Tuesday, Loop Capital reiterated its Buy rating on Braze Inc (NASDAQ:BRZE) shares, with a steady price target of $75.00. The firm's confidence in the company is rooted in its market leadership and the potential for reacceleration of growth once the macroeconomic environment improves. Braze, known for its multi-channel customer engagement platform, recently hosted its second Investor Day at the FORGE user group conference in Las Vegas.
During the event, management commented on the Net Revenue Retention (NRR) trend, which has been a focal point for investors since the last earnings call. The company anticipates a slight decline in NRR from 114% in Q2 to around 110% by Q4 of the current year. This forecast is based on the current quarter's performance and acknowledges the possibility of a further decline should macroeconomic conditions worsen.
The company's position as a leader in multi-channel customer engagement was reinforced by discussions with customers and partners, validating its strong product offerings and support for emerging communication channels. However, the broader economic situation has led to longer sales cycles for Braze.
Despite these challenges, Loop Capital believes Braze's technology platform is crucial for large brands seeking to transition from email-centric marketing to a real-time streaming data platform that can handle the complexities of multi-channel marketing, including mobile and social channels.
Braze's reputation is further bolstered by its advancements in generative AI technology. The company is one of the pioneers in training its own Large Language Models (LLMs) and actively applying them. This move positions Braze to potentially command premium pricing for its AI-based solutions due to the measurable return on investment they offer.
Moreover, as restrictions on third-party data usage increase across major advertising platforms, Braze's first-party data-based marketing platform is becoming increasingly significant. Loop Capital's maintained Buy rating and price target are largely based on the company's strong market and product positioning, which are expected to drive growth once the economic climate becomes more favorable.
In other recent news, Braze Inc. experienced a number of adjustments to their price targets from different analysis firms. Oppenheimer revised their price target to $51, down from $60, while maintaining an Outperform rating. Similarly, DA Davidson adjusted their target to $55, down from $65, but retained a Buy rating. A third analysis firm held steady with a Buy rating and a $70 price target. TD Cowen also reiterated a Buy rating, with a consistent price target of $52.
These adjustments followed an investor event where Braze's management provided detailed insights into the company's operations and future plans. Notably, they increased the higher end of their long-term gross margin target to 74%, representing a 200 basis point improvement. Moreover, they reported significant customer growth, with about a 50% increase in customers using five or more channels since FY2021.
However, concerns were raised regarding the company's near-term outlook. The management's guidance for a 110% net revenue retention (NRR) rate for the fourth quarter of fiscal year 2025 suggests potential volatility. Furthermore, a growth and profit framework for fiscal years 2026 to 2028 was introduced, which implies the possibility of growth rates falling below 15%.
In terms of earnings and revenue, Braze reported a significant 26% increase in its fiscal second quarter 2025 revenue, reaching $145.5 million. The company also added 61 new customers, raising its total to 2,163. For the third quarter, revenue is projected to fall between $147.5 million and $148.5 million, with full fiscal year 2025 revenue expected to be between $582.5 million and $585.5 million.
InvestingPro Insights
As Braze Inc (NASDAQ:BRZE) navigates the current economic landscape, real-time data from InvestingPro provides a deeper understanding of the company's financial health and market performance. With a market capitalization of approximately $3.56 billion, Braze is trading near its 52-week low, reflecting the challenges it faces in the market. Despite the stock's poor performance over the last month, with a 22.82% decline, analysts remain optimistic, as evidenced by 11 analysts revising their earnings upwards for the upcoming period.
One of the key InvestingPro Tips for Braze is its strong liquidity position; the company holds more cash than debt on its balance sheet and has liquid assets that exceed short-term obligations. This financial stability is crucial for weathering economic headwinds and investing in growth opportunities like generative AI technology. While the company has not been profitable over the last twelve months, analysts predict profitability this year, which could be a turning point for investor sentiment.
Investors can find additional insights with more InvestingPro Tips available, providing a comprehensive view of Braze's potential as the company aims to leverage its market leadership and innovative AI technology to reaccelerate growth. For a detailed analysis, visit the InvestingPro platform for Braze Inc at https://www.investing.com/pro/BRZE.
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