What Happened?
Shares of financial automation software company BlackLine (NASDAQ: BL) fell 2.1% in the afternoon session after Baird downgraded the stock from Outperform to Neutral and lowered its price target to $55.00 from $64.00, citing a "challenging quarter."
The downgrade followed the financial software company's third-quarter results, where it faced unexpected customer churn. According to Baird's analysis, some existing clients departed while evaluating BlackLine's new pricing model. The company's earnings report also showed a significant drop in profitability, with GAAP net income falling to $5.3 million from $17.2 million in the same quarter of the previous year, even as revenue increased. Adding to the concerns, BlackLine provided guidance for the fourth quarter and the full fiscal year that fell short of analyst expectations for both revenue and earnings per share.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy BlackLine? Access our full analysis report here.
What Is The Market Telling Us
BlackLine’s shares are not very volatile and have only had 7 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 11 days ago when the stock gained 4.7% on the news that reports surfaced that German software giant SAP SE had previously made a takeover approach for the financial software company. According to a report, SAP approached BlackLine earlier in the year with an offer that valued the company in the high $60s per share. BlackLine reportedly rejected the offer, and the two companies were not in active discussions. Despite the rejection, the news of takeover interest from a major player like SAP sparked investor optimism about a potential future deal, as other reports also suggested that SAP could be considering a new bid.
BlackLine is down 7.5% since the beginning of the year, and at $55.78 per share, it is trading 15% below its 52-week high of $65.64 from February 2025. Investors who bought $1,000 worth of BlackLine’s shares 5 years ago would now be looking at an investment worth $531.30.
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