Bank of America Securities analyst Koji Ikeda reiterated a Sell rating on Blackbaud (BLKB – Research Report) yesterday and set a price target of $70.00.
Koji Ikeda has assigned a Sell rating to Blackbaud’s stock (ticker: BLKB) due to a combination of factors reflecting uncertainty in the company’s future growth prospects. The fourth quarter of 2023 showed mixed financial results, with revenues not meeting expectations, although adjusted EBITDA was higher than anticipated. For the year 2024, the guidance provided by the company fails to inspire confidence, projecting revenue figures that only match market expectations and a profit forecast that falls short. Additionally, while Blackbaud is actively working on its five-point operational plan aimed at achieving an appealing Rule-of-40 target profile, there are concerns about the sustainability of organic growth once the current pricing strategy, which is driving growth and free cash flow, has fully taken effect.
The company’s aggressive pricing strategy appears to be effective in the medium term, with high retention rates suggesting that further revenue growth and free cash flow generation are likely. Despite this, Ikeda believes that the potential for organic growth remains questionable once the pricing adjustments are complete, which could hinder a shift in investor sentiment toward the stock. Furthermore, while some positive developments include a new share buyback program and operational efficiencies from closing data centers, the report also indicates potential exhaustion of margins improvement levers. This, coupled with unforeseen payments due to a security incident, and softer than expected demand for EVERFI, suggests that the company’s margin expansion may be limited going forward. Consequently, Ikeda’s unchanged price objective of $70, which is below the current stock price, reflects a discount in valuation relative to Blackbaud’s small and mid-cap peers.
Ikeda covers the Technology sector, focusing on stocks such as Dynatrace, Elastic, and Datadog. According to TipRanks, Ikeda has an average return of 20.3% and a 67.55% success rate on recommended stocks.
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Blackbaud (BLKB) Company Description:
Blackbaud, Inc. engages in the provision of cloud-based and on-premises software solutions and related services for the global philanthropic community. It offers solutions for fundraising and constituent relationship management (CRM), marketing, advocacy, accounting, peer-to-peer fundraising, corporate social responsibility (CSR), school management, ticketing, grantmaking, financial management, payment processing, and analytics. The company was founded by Anthony E. Bakker in 1981 and is headquartered in Charleston, SC.
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