On Wednesday, Citi raised its price target on shares of Braze Inc (NASDAQ:BRZE) to $59.00 from the previous target of $58.00, while retaining a Buy rating on the stock. The adjustment follows positive signals from the business-to-consumer (B2C) software sector, as evidenced by companies like Shopify (NYSE:SHOP) Inc. and Kavak (KVYO).
Citi's industry checks suggest that strength in the enterprise segment may counterbalance the volatility seen in the small and medium-sized business (SMB) space, marking a departure from trends observed in seat-based business-to-business (B2B) software companies.
Citi anticipates that Braze will likely surpass its revenue expectations for Q2, slightly improving upon the 3% growth seen in the previous quarter. Furthermore, the firm forecasts that the company's Q3 growth guidance could outpace the consensus by 1-1.5 percentage points.
The upbeat outlook is partly due to the upcoming Braze Investor Event scheduled for September 23, during its annual customer conference, Forge. At this event, more insights are expected regarding the company's trajectory towards achieving over $1 billion in annual recurring revenue (ARR) and becoming a Rule of 40 (Ro40) company, which balances growth and profitability.
In light of these developments, Citi has modestly increased its estimates for Braze above the company's guidance. However, it has slightly lowered its projections for outer year estimates as a precaution. The new price target of $59 reflects an update to software valuation regression inputs, which have seen higher movements across the sector since the start of the quarter. Despite the adjustments, Citi maintains its Buy/High Risk rating for Braze Inc.
In other recent news, Braze Inc. has been receiving positive evaluations from analysts and shareholders alike. TD Cowen and DA Davidson maintained their Buy ratings on Braze, with TD Cowen projecting a 23% growth in total revenue for the full year 2025. Scotiabank also upgraded Braze's stock from Sector Perform to Sector Outperform, indicating confidence in the company's sustained growth potential.
The company's recent developments include the introduction of a new data platform aimed at enhancing customer engagement and the approval of executive pay by shareholders. The shareholders also elected William Magnuson, David Obstler, and Tara Walpert Levy as Class III directors, reinforcing the company's leadership.
Braze's financial performance has also been noteworthy, with first-quarter results revealing a 33% revenue growth to $135.5 million, surpassing the estimated 29%. This financial performance, coupled with the company's ongoing strategic investments in research and development, global expansion, and customer engagement innovation, demonstrates Braze's commitment to growth and efficiency.
The upcoming second-quarter earnings report is expected to provide further insights into Braze's financial health and growth sustainability. In the meantime, analysts and investors are keeping a close eye on Braze, given the positive outlook and projections from firms such as TD Cowen, DA Davidson, and Scotiabank.
InvestingPro Insights
As Braze Inc (NASDAQ:BRZE) continues to navigate the B2C software sector, recent data from InvestingPro provides additional context to Citi's updated price target and the company's financial health. With a market capitalization of approximately $4.4 billion, Braze is trading at a high Price / Book multiple of 10.09 and a negative P/E ratio, indicating that profitability remains a challenge. The company's revenue growth is robust, with a 33.12% increase over the last twelve months as of Q1 2023. This suggests that Braze is expanding its market presence despite not being profitable during this period.
InvestingPro Tips highlight that Braze holds more cash than debt, which is a positive sign for financial stability, and its liquid assets exceed short-term obligations, suggesting good short-term financial health. Additionally, eight analysts have revised their earnings upwards for the upcoming period, reflecting a positive sentiment about the company's future performance. However, analysts do not expect Braze to be profitable this year. It's also worth noting that the company does not pay a dividend, which could be a factor for investors seeking income as well as growth.
For investors looking for a deeper dive into Braze's financials and future prospects, InvestingPro offers a comprehensive set of additional tips. These insights can help investors make more informed decisions about the potential risks and rewards associated with Braze Inc's stock. To explore further, visit https://www.investing.com/pro/BRZE for more InvestingPro Tips related to Braze Inc.
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