Why This Analyst Has Turned Bearish On BlackLine

While Blackline Inc’s BL business and management team are strong, the company’s stock is currently trading at a premium to its horizontal software peers and seems to reflect all the potential good news as well as some potential M&A premium, according to BofA Securities.

The Blackline Analyst: Koji Ikeda downgraded the rating for Blackline from Neutral to Underperform, while reducing the price target from $75 to $64.

The Blackline Thesis: Given the stock’s premium valuation, any gains in share price will need to come from higher estimates rather than multiple expansion, Ikeda said in the downgrade note.

“We have previously written that we believe the business has the potential to drive at best a 25% organic revenue/billings growth trajectory over the medium-term given a crowded mid-market. However, we believe that a visible path to 30% organic revenue/billings growth and ROI proof points of its increased investment profile announced earlier this year are likely necessary to drive its current multiple higher,” the analyst wrote.

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“This could be challenging given the slowing billings growth of 19% y/y displayed in 1Q22, and the downward trajectory of its TTM billings over the past two quarters. Furthermore, we see the potential for longer sales cycles and/or deal push outs in the enterprise opportunity if we head into a tighter demand environment that could affect sales metrics,” he added.

BL Price Action: Shares of BlackLine were down 6.92% to $63.76 at the time of publication Monday, according to .