Braze Shares Gain Momentum: Analysts Bullish on Privacy Landscape Opportunities and Profitability Milestone

Braze shares backed by Buy rating, Goldman Sachs sees opportunity in evolving privacy landscape By Investing.com

On Friday, Goldman Sachs (NYSE:GS) reiterated its Buy rating on Braze Inc (NASDAQ:BRZE) with a steady price target of $65.00. The firm's assessment follows Braze's second-quarter fiscal year report for July, which revealed revenues surpassing Wall Street expectations by 3% and an operating margin approximately 800 basis points above estimates, as per FactSet data. Despite a year-over-year revenue growth of 26%, there was a 4 percentage point organic slowdown compared to the first quarter. Braze experienced a 16% year-over-year increase in billings, which fell short of the anticipated 26%. The total Remaining Performance Obligations (RPO) rose by 32% year-over-year, a slight decrease from the 38% growth in the first quarter. The company's current RPO (cRPO) saw a 24% year-over-year increase, compared to a 29% increase in the previous quarter. The Net Revenue Retention (NRR) rate dipped by three points to 114%, reflecting a trend among application software companies of contract normalization, particularly those signed during 2020-2021. Specifically, the Small and Medium Business (SMB) segment, with customers generating less than $500K in Annual Recurring Revenue (ARR), grew by only 9% year-over-year. For the third quarter, Braze's revenue guidance aligns with market expectations, projecting a 19% year-over-year increase. The company anticipates an Earnings Before Interest and Taxes (EBIT) margin of negative 3%, with a significant improvement to the full-year EBIT margin guidance, adjusting from negative 4% to negative 1%. Goldman Sachs' positive outlook on Braze is reinforced by the firm's confidence in Braze's superior architecture and its potential to capitalize on the growing emphasis on Artificial Intelligence (AI) in enterprises, as well as ongoing changes in privacy regulations that heighten the need for more personalized customer engagement. In other recent news, Braze Inc. has been making significant strides in its financial performance. The company witnessed a remarkable quarter, achieving its first-ever positive Non-GAAP operating income and surpassing its own guidance. This strong performance reflects robust upselling activities and sustained new business trends, leading to a significant top-line beat. Braze also posted adjusted earnings per share of $0.09 for the second quarter, exceeding analyst expectations of a $0.03 loss. Revenue saw a 26.4% year-on-year increase, reaching $145.5 million and outperforming the anticipated $141.3 million. Canaccord Genuity and DA Davidson have maintained a Buy rating on Braze shares, showing confidence in Braze's growth trajectory and market positioning. Following Goldman Sachs' reaffirmation of a Buy rating on Braze Inc (NASDAQ:BRZE), a closer look at InvestingPro's real-time data and insights may provide additional context for investors. Braze's market capitalization stands at approximately $4.39 billion, with a notably high Price to Book ratio of 10.28, indicating a premium valuation relative to the company's book value. Despite a strong revenue growth of over 33% in the last twelve months as of Q1 2025, analysts are not expecting Braze to be profitable this year, as reflected by a negative P/E ratio of -28.78. This aligns with the company's recent operating margin performance, which although better than expected, still indicates profitability challenges. On the liquidity front, Braze holds more cash than debt on its balance sheet, and its liquid assets exceed short-term obligations, providing the company with a solid financial footing to manage its operations and invest in growth opportunities. However, it's worth noting that Braze does not pay a dividend, which may influence the investment strategy of income-focused shareholders. Investors may also take interest in Braze's recent stock performance, which has seen a strong return over the last month and three months, despite a more mixed longer-term picture. For those seeking further insights, there are additional InvestingPro Tips available for Braze Inc, which can be found by visiting the dedicated page for Braze on InvestingPro. These tips delve deeper into the company's financial health, valuation, and market performance, offering a comprehensive analysis for informed decision-making.

Analyst maintains Overweight on Braze shares, points to non-GAAP profitability milestone By Investing.com

On Friday, Barclays (LON:BARC) reiterated its Overweight rating on Braze Inc (NASDAQ:BRZE), maintaining a $70.00 price target. The firm's positive stance is supported by Braze's addition of its second and third eight-figure customers. Barclays highlighted the company's significant growth potential within its largest customers and the contribution of new channels, such as Rich Communication Services (RCS), and new generative AI use cases to increased account spending. Braze's market share gains were acknowledged, though the analyst noted that a more stable macroeconomic environment might be necessary for further near-term growth. The return of Monthly Active User (MAU) upsells was seen as an encouraging sign. Despite softer Recurring Profitable Obligations (RPO) and billings growth, which can be attributed to acquisition comparisons and contract renewal dynamics, investor feedback appears to be generally understanding. The analyst's commentary also touched on the ongoing discussions among investors regarding Braze's revenue growth prospects for the end of the fourth quarter and the potential timing for revenue reacceleration. Additionally, the improvement in net new customer additions in the second quarter and the company's achievement of non-GAAP operating profitability for the first time were well-received by investors. In other recent news, Braze Inc. has been demonstrating robust financial performance, exceeding expectations in its second quarter. The company achieved its first-ever positive Non-GAAP operating income, with revenues growing 26.4% year-on-year to reach $145.5 million, surpassing the projected $141.3 million. Adjusted earnings per share were $0.09, outperforming analyst expectations of a $0.03 loss. Goldman Sachs (NYSE:GS), Canaccord Genuity, and DA Davidson have all maintained a Buy rating on Braze, reflecting confidence in the company's growth trajectory. Recent developments include a 16% year-over-year increase in billings and a 32% year-over-year rise in Remaining Performance Obligations (RPO). However, these figures fell short of previous estimates. The company's Net Revenue Retention (NRR) rate dipped to 114%, a trend observed among application software companies. For the third quarter, Braze's revenue guidance aligns with market expectations, projecting a 19% year-over-year increase. The company also anticipates an Earnings Before Interest and Taxes (EBIT) margin of negative 3%, with an improvement to the full-year EBIT margin guidance, adjusting from negative 4% to negative 1%. As Barclays maintains an optimistic view on Braze Inc (NASDAQ:BRZE), real-time data from InvestingPro provides a detailed financial perspective. Braze's market capitalization stands at $4.39 billion, underscoring its significant presence in the sector. Despite the company's growth prospects, analysts are not expecting Braze to be profitable this year, as reflected in a negative P/E ratio of -28.78, which further adjusts to -34.61 for the last twelve months as of Q1 2025. This aligns with the company's recent performance, where it has not been profitable over the past year. On the positive side, Braze holds more cash than debt, indicating a strong balance sheet, and its liquid assets exceed its short-term obligations, suggesting financial stability in the near term. The company's revenue growth remains robust, with a 33.12% increase over the last twelve months as of Q1 2025, which could be a driving factor behind the analyst's positive outlook. Two InvestingPro Tips to consider are that Braze is trading at a high revenue valuation multiple and at a high Price/Book multiple of 10.28, which may indicate expectations of future growth. For those interested in a deeper analysis, InvestingPro offers additional tips on Braze Inc, which can be found at https://www.investing.com/pro/BRZE. These insights could be valuable for investors looking to understand the company's financial health and growth trajectory in greater detail.