By Sam Boughedda
Cloud-based software company Braze Inc (NASDAQ:BRZE) was initiated with a Buy rating and a $53 per share price target by UBS analyst Taylor McGinnis on Tuesday.
The analyst wrote in a note to investors that sustainable 30%+ growth is driving the Buy rating.
"At 8.5x CY23 EV/S, BRZE trades in-line with peers growing in the low-30s, but we believe BRZE can grow in the mid-30s in CY23 and maintain 30%+; even despite evidence that deal activity inflected amid COVID with a shift towards personalized multichannel engagement," said McGinnis.
After assessing the company and its competition, UBS came away with a few key takes, stating that "almost all believed BRZE spend would increase, with some expecting an acceleration while others a moderation given recent significant investment." The analyst added that "MAU growth data shows an inflection amid COVID and decel since, suggesting future revs might be at risk to slow. Yet, we struggled to correlate checks' MAU bases with spend and BRZE's revs growth has outpaced its MAU growth; evidence of the pricing complexity and greater contribution from other growth sources like paid channels and additional geos/use cases."
McGinnis stated that in a downturn, they believe Braze would still be chosen for greenfield mobile/web use cases, with incumbents less likely to be displaced for email due to switching costs.
"We view BRZE's recession risk exposure as in-line with the middle of front-office peers, as its average new logo/international revs mix and up-market presence help to offset possible negatives (like B2C ties)," explained the analyst.