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Braze Analysts Hail Its cRPO Momentum While Keeping Their Guard Over Macro Challenges

Benzinga · 09/13/2022 12:19
  • Braze, Inc (NASDAQ:BRZEreported Q2 revenue growth of 54.5% year-on-year to $86.1 million, beating the consensus of $81.1 million. Adjusted EPS loss of $(0.16) beat the consensus loss of $(0.20).
  • Needham analyst Scott Berg REITERATED A BUY and $70 price target on Braze.
  • Braze reported a substantial upside to 2Q financial results driven by sales metrics that were better than expected in a softening macro. 
  • While some may point to a sharp deceleration in billings growth as a change in the demand environment, cRPO grew 51.9% versus 55.8% in 1Q, which he viewed as a purer sales metric that eliminates noise around invoicing terms. 
  • However, macro pressure is impacting 2H guidance (especially 4Q revenues), which he viewed as prudent given the macro backdrop. 
  • Piper Sandler analyst Brent Bracelin maintained Braze with an Overweight and raised the price target from $42 to $47.
  • Elongating sales cycles and a shift in customer payment terms pressured calculated billings growth to moderate as deferred revenue declined Q/Q. 
  • However, robust customer renewals contributed to healthy bookings growth, with cRPO increasing Q/Q and Y/Y.
  • Given macro headwinds, the 2H growth outlook implies growth could moderate versus 1H.
  • He bumped his top-line estimates by $4 million this year on 46% growth without rolling forward the upside into next year, pending better visibility into budget priorities.
  • Raymond James analyst Brian Peterson reiterated Braze with an Outperform and raised the price target from $40 to $50 following 2Q results that showed a deceleration in most key metrics but still illustrate Braze's above-market growth rates. 
  • Bears will likely point to the 9% billings miss and slowing growth in net adds in NRR, although bulls still have pretty robust growth in metrics like cRPO. 
  • Management's reference to extended sales cycles is consistent with other prominent front-end software vendors, albeit marketing infrastructure will be far more resilient than discretionary ad spend. 
  • He was also encouraged that management raised its long-term gross margin profile. 
  • While shares will likely be under pressure post-print, he believes the company's product positioning and competitive differentiation should allow for secular share gains.
  • Price Action: BRZE shares traded lower by 15.42% at $36.86 on the last check Tuesday.