This Customer Engagement Software Stock Is Surging. Here’s Why.

Braze, the maker of customer engagement software, reported second-quarter adjusted earnings and revenue that topped analysts’ expectations. (Dreamstime)

Braze stock saw double-digit gains on Friday after the customer engagement platform posted a solid second quarter and boosted its financial guidance.

Adjusted earnings of 15 cents a share came in above analysts’ calls for three cents a share, according to FactSet. Revenue surged 28% from the prior year to $180.1 million, topping the $171.6 million Wall Street had forecast.

The software maker also more than doubled its forecast for its full-year profit. Braze sees adjusted earnings in the range of 41 cents to 42 cents a share, compared with its previous outlook of 15 cents to 18 cents and above the 17 cents analysts were looking for.

The company said it expects revenue between $717 million and $720 million, up from a prior range of $702 million to $706 million. Wall Street had anticipated $704.5 million.

Mizuho analysts noted Friday that Braze delivered a “strong beat and raise” in the latest quarter.

“Operating margin of 3.4% exceeded consensus of 0.7% and should alleviate investor concerns on margin expansion,” the team wrote. Mizuho reiterated an Outperform rating on Braze shares and raised the price target slightly to $45 from $40.

The stock climbed 10% to $30.54 on Friday after rising by more than 20% in premarket trading. The S&P 500 and Nasdaq Composite were down 0.6% and 0.3%, respectively.

Citi Research, similarly, reiterated a Buy rating on the stock while boosting its target for the price to $52 from $50. The firm cited a “modest reacceleration” in organic revenue during the quarter.

Braze’s strong performance appeared to be driven by better execution rather than industry trends, the analysts continued. That highlights how Braze stands out relative to other makers of software applications, they said.

The results weren’t perfect. Oppenheimer analysts pointed out that net revenue retention—a measure of how well the company can retain revenue from existing customers over a 12-month period—came in at 108% for the period ended July 31. This compares to 114% for the same period last year and 109% sequentially.

A figure over 100% indicates that revenue is outstripping the amount lost to churn, or customers who stop doing business with a company in a given period.

“NRR has yet to find a bottom which leave tough optics,” the analysts wrote. “However, the stabilizing in period NRR trends makes us optimistic that NRR expansion looms for Braze, and this development could catalyze higher multiples.” Oppenheimer rates Braze at Outperform with a $38 target price.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com