Investors in Braze, the customer-engagement software company, got a fresh reason for optimism on Thursday as Oppenheimer raised its price target to $36, citing resilient demand for the company's AI-powered marketing tools. The stock popped on the news, reflecting growing confidence that Braze can deliver a strong fiscal second quarter.
What's driving the optimism?
Braze sells software that helps brands figure out the right message to send to customers, and when to send it. Its platform analyzes user behavior and uses AI to personalize communications across email, push notifications, and in-app messages. Think of it as the engine behind those timely "Your cart is waiting" alerts or personalized product recommendations.
Oppenheimer's analysts expect Braze to report fiscal Q2 revenue of $220 million, a 22% increase from the same period last year. They also project adjusted earnings of $0.15 per share. But the firm says the number that matters most is current remaining performance obligations (cRPO).
cRPO represents the value of contracted revenue that hasn't yet been recognized as income. It's essentially a backlog of work that's already been sold but not yet delivered. For subscription-based software companies like Braze, cRPO is a leading indicator of future revenue because it shows how much business is already locked in.
"A faster cRPO growth rate suggests that new deals and expansions are coming in at a healthy clip," the analysts noted, adding that this metric often predicts how billings and revenue will trend in the coming quarters.
Why AI is the key driver
Braze has been leaning heavily into AI features, such as predictive sending and AI-generated content, to differentiate itself in a crowded market. The company's tools help marketers automate decisions about which customers to target and what to say, making campaigns more efficient and effective.
This focus appears to be paying off. Oppenheimer's checks suggest that demand for these AI capabilities is holding up, even as some businesses tighten their software budgets. The broader trend of companies investing in AI to improve customer engagement is a tailwind for Braze, similar to how Nvidia's revenue forecast signals strong AI demand across the tech sector.
However, Braze operates in a competitive landscape that includes giants like Salesforce and Adobe, as well as smaller players. To keep growing, it must convince customers that its AI tools deliver measurable returns on investment.
What it means for investors
For everyday investors, the key takeaway is that Braze's stock could be sensitive to its upcoming earnings report, particularly the cRPO figure. If cRPO growth accelerates, it would signal that the company is winning new business and expanding existing accounts, which could support the stock price. On the other hand, a slowdown would raise concerns about demand.
Oppenheimer's price target of $36 implies upside from current levels, but it's important to remember that price targets are just one analyst's opinion. The stock has been volatile, and the company is not yet profitable on a GAAP basis, though it does generate positive adjusted earnings.
Investors should also consider the broader software sector. Many cloud and SaaS stocks have been under pressure as investors rotate toward AI hardware names. But Braze's focus on AI-driven marketing could help it stand out, much like Nutanix's strong quarter boosted its outlook.
What to watch next
Braze is expected to report its fiscal Q2 results in early September. Along with revenue and earnings, investors will scrutinize cRPO growth, customer retention, and any guidance for the rest of the year. The company's ability to convert its AI investments into sustained revenue growth will be the central question.
Oppenheimer's move is a positive signal, but it's not a guarantee. As with any stock, do your own research and consider how Braze fits into your portfolio's risk profile. The company's growth story is compelling, but it comes with the volatility typical of high-growth tech stocks.
For more context on how analysts are reacting to other companies' results, check out Williams-Sonoma's strong quarter and Oppenheimer's WisdomTree target hike.
