Braze Shares Pull Back Following Earnings-Driven Rally

The stock is still up 21% YTD and remains well above the record low of $22.53.

Shares of Braze (BRZE, $33.12) have given up much of their recent post-earnings rally of 20%.

After the company in late March reported better-than-expected numbers for FQ4 (Jan), the stock jumped to a high of $38.05. But the shares are now nearly back to where they traded just ahead of the results.

Braze, a provider of a cloud-based customer engagement platform, delivered impressive FQ4 top-line growth of 40%, driven by subscription revenue growth of 44%. For the year, total revenue rose 49% to $355.4 million.

However, Brazed issued FQ1 (April) and FY’24 (Jan.) revenue guidance that fell short of expectations, as the company in the January quarter saw elongated sales cycles and slower new business growth.

The initial FY’24 total revenue outlook of $433 million to $438 million represents growth of around 23%.

Brazed ended FY’23 with total RPO of $455.7 million, up 22% year over year. Current RPO rose 31% to $312.6 million. Growth rates for these two metrics in FQ4 decelerated by at least 1100 basis points sequentially.

In FQ4, Braze’s total customer count expanded 29% to 1,770. The number of large accounts (those with ARR of $500k+) gained 46% to 156. These large customers now represent 57% of total ARR.

Dollar-based net retention in FQ4 ticked down to 124% from 126% in the two previous quarters and 128% in the year-ago quarter. For large customers, this figure fell to 126% from 129% in FQ3 and 136% in the year-ago quarter.

Braze shares have rebounded sharply from the record low of $22.53 reached in November and are up 21% YTD.

At recent prices, the enterprise value is 6.2 times the FY’24 consensus revenue estimate of $436.4 million (representing growth of 22.8%) and 5.1x the FY’25 consensus of $535.7 million (growth of 22.8%).

On the FQ4 earnings call, Braze CEO Bill Magnuson talked about the company’s recent AI-related initiatives. Last May, Braze started to invest in generative AI, building GPT-3 into the platform for AI copywriting. In December, DALL-E was integrated into the image library.

New machine learning features have been introduced to improve outcomes of customer engagement campaigns on the Braze platform, with customization options based on a brand’s usage footprint.

A personalization feature automatically determines the content variation that each individual message recipient will most likely engage with based on data from consumers with similar behaviors and profiles. Also, Braze expanded its predictive suite to use machine learning to identify which users are most likely to churn or make a purchase.