Braze (NASDAQ: BRZE) stock has been in correction for several quarters but has proven resilient. Now, the bottom is in, and the rebound has begun. Among the factors driving this market is sentiment. Analysts issued a string of downward price target revisions ahead of the report and put the stock on MarketBeat’s list of Most Downgraded companies, driving it into deep-value territory. The Q1 earnings report catalyzed a rebound.
The thing to keep in mind is that this most-downgraded stock is still rated a Moderate Buy with ample upside. The downgrades are relative: this stock is also ranked well on the list of Top Rated Stocks. Trading at $36.78 ahead of the Q1 release, the stock was 20% below the lowest analyst target and 65% below the consensus. Because the results include outperformance, momentum is present, and guidance was raised, the analysts should stick to their targets and guide this market higher.
Braze Gains Traction With Large Customers
Braze had a solid quarter with growth in all metrics. The tech company produced $135.5 million in net revenue, a gain of 33.1% over last year. The pace of growth is flat compared to last year and 300 basis points above the consensus. Strength is driven by new client wins, penetration, and renewals.
New clients grew by 12%, led by a 30% increase in clients that produced more than $500,000 in annual recurring revenue. The net retention rate reached a solid 117% as penetration deepened. The total NRR was driven by a 119% increase in large client NRR. RPO, a measure of future revenue, increased by 56%, suggesting strength will continue. Segmentally, subscription revenue grew by 34% and is 96% of the revenue, while services grew by 17%.
The margin news is also good. The company logged margin contraction at the gross and operating levels but less than expected. The takeaways are that the GAAP losses are primarily share-based compensation, and the adjusted ($0.05) in earnings is less than half of last year’s loss and a nickel ahead of expectation, including the impact of higher share count. In dollars, the loss came in at $10 million and is down nearly 40% YOY, keeping the company on track to reach profitability within the next eight quarters.
Guidance is among the best details of the report. The Q1 strength was not a fluke and is expected to persist through year-end. The company guidance the outlook for Q2 and full-year 2025 revenue above the consensus estimates and implies adjusted profits before the end of the year.
Braze Is Well Capitalized: Has a Strong Balance Sheet
Braze is well capitalized and has a strong balance to sustain it through to reach profitability. At the end of Q1, the highlights include an increased cash position offset by decreased receivables, leaving current assets flat and total up. Total assets are up on property investment to aid long-term growth. Liabilities are also up but on deferred revenue, which is okay. There is no debt, and total liabilities are only 0.46x assets for this fortress company.
Braze stock price surged in early trading to open with a significant gap. The problem is that sellers took advantage of the pop and have driven the market back to break even. The question is, what will the market do now? Based on the results, the answer is to continue to buy the dip. The surge and move lower following the release was made on incredibly low volume and lacks conviction. The takeaway is that price action returned to its prior levels, where it was undervalued and support was present. Support is seen in the volume spike that accompanied the pre-release trading and will likely keep this stock from falling further.
