Over the past six months, Braze’s stock price fell to $27.24. Shareholders have lost 16.5% of their capital, which is disappointing considering the S&P 500 has climbed by 19.5%. This may have investors wondering how to approach the situation.
Following the drawdown, is this a buying opportunity for BRZE? Find out in our full research report, it’s free for active Edge members.
Why Does BRZE Stock Spark Debate?
With its technology powering interactions with 6.2 billion monthly active users across the digital landscape, Braze (NASDAQ: BRZE) provides a platform that helps brands build and maintain direct relationships with their customers through personalized, cross-channel messaging and engagement.
Two Positive Attributes:
1. Billings Surge, Boosting Cash On Hand
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
Braze’s billings punched in at $177.2 million in Q2, and over the last four quarters, its year-on-year growth averaged 24.4%. This performance was fantastic, indicating robust customer demand. The high level of cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth. 
2. Projected Revenue Growth Is Remarkable
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite, though some deceleration is natural as businesses become larger.
Over the next 12 months, sell-side analysts expect Braze’s revenue to rise by 19.2%. While this projection is below its 26.6% annualized growth rate for the past two years, it is healthy and indicates the market sees success for its products and services.
One Reason to be Careful:
Operating Losses Sound the Alarms
Many software businesses adjust their profits for stock-based compensation (SBC), but we prioritize GAAP operating margin because SBC is a real expense used to attract and retain engineering and sales talent. This metric shows how much revenue remains after accounting for all core expenses – everything from the cost of goods sold to sales and R&D.
Braze’s expensive cost structure has contributed to an average operating margin of negative 20.3% over the last year. This happened because the company spent loads of money to capture market share. As seen in its fast revenue growth, the aggressive strategy has paid off so far, and Wall Street’s estimates suggest the party will continue. We tend to agree and believe the business has a good chance of reaching profitability upon scale.
Final Judgment
Braze’s merits more than compensate for its flaws. With the recent decline, the stock trades at 3.7× forward price-to-sales (or $27.24 per share). Is now the right time to buy? See for yourself in our full research report, it’s free for active Edge members.
Stocks We Like Even More Than Braze
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