Braze (NASDAQ: BRZE) presents significant investment opportunities in 2025, including a potential share price surge and takeover prospects. The stock’s reversal is fueled by sustained outperformance, nearing profitability, and favorable analyst sentiment. Its in-demand customer engagement platform (CEP) further enhances its takeover appeal. Potential buyers include Salesforce (NYSE: CRM) and Adobe (NASDAQ: ADBE), which could use the platform to bolster its cross-channel marketing capabilities and improve its value for advertisers. Salesforce, the world’s leading customer relationship management platform, is a natural buyer because Braze’s services complement its own, providing a path to upsells and cross-selling. Either way, investors will win.
Braze Outperforms in Q3, Raises Guidance, Shares Fall
Braze had a solid quarter with slow growth but was still strong at over 22% and 300 basis points, better than the consensus forecast expected. Strength was seen in the core subscription business, driven by new clients, large clients, upsells, and renewals. The total client count grew by 10%, with large clients (contributing more than $500,000 in ARR) up by 24%. Net retention rate, a measure of revenue contribution from existing clients, came in at 113% across the system compared to last year and 116% among large clients as upselling and service penetration deepened.
The margin news is mixed but favors shareholders. The company’s gross margin narrowed by 90 bps, and losses persist due to share-based compensation, reinvestment, and client acquisition costs. Still, the operating losses are narrowing on a GAAP and adjusted basis and are less than expected. The net result is $0.02 in adjusted earnings, three cents better than expected, and an improvement to the guidance.
The company’s guidance is also solid. Braze has forecasted another sequential growth in revenue for Q4, revenue up 18% compared to last year and above the consensus reported by MarketBeat. The full-year forecast is equally strong and includes an adjusted EPS of nearly $0.10, nearly double the market outlook. However, because of the trends, Braze is likely cautious, and outperformance should be expected.
Analysts Response Is Mixed: Conviction Firms for a 30% Upside
The analysts’ response to Braze’s Q3 results and guidance is mixed, including some reduced, reiterated, and increased price targets. The takeaway is that more analysts are raising their targets, and the net result is a narrowing of the expected range centered on the pre-release consensus target. The pre-release consensus target assumes more than 30% of upside for this stock, sufficient to put the market at a fresh high and on track to complete a technical reversal. Takeaways from the chatter are that this company continues to execute well, and the growth outlook is positive, including earnings, which are expected to triple in F2025 and double the following year.
The market response to Braze’s news is also mixed. The market retreated following the report, showing resistance at a critical level but also support at a critical level and the potential to continue rising. Support is seen at a cluster of moving averages that include the 30-day, 150-day, and 30-month EMAs, which are on the cusp of a golden crossover.
The 30 and 50-day EMAs are already crossing over each other; all that’s left is for the market to continue advancing to confirm the pattern. In this scenario, the market could easily retest the critical resistance at $45 as it works toward the analysts' consensus target of $53. There is also the institutional activity to consider. The institutions have bought this technology stock on balance every quarter this year, owning more than 90% of the stock in Q4, and provide a strong tailwind for the market.
