What a time it’s been for Braze. In the past six months alone, the company’s stock price has increased by a massive 65.4%, reaching $31.41 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now still a good time to buy BRZE? Or are investors being too optimistic? Find out in our full research report, it’s free.
Why Does Braze Spark Debate?
With its technology powering interactions with 6.2 billion monthly active users across the digital landscape, Braze (NASDAQ: BRZE) provides a platform that helps brands build and maintain direct relationships with their customers through personalized, cross-channel messaging and engagement.
Two Positive Attributes:
1. Billings Surge, Boosting Cash On Hand
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
Braze’s billings punched in at $249 million in Q1, and over the last four quarters, its year-on-year growth averaged 32.1%. This performance was fantastic, indicating robust customer demand. The high level of cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth. 
2. Customer Acquisition Costs Are Recovered Quickly
The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.
Braze is efficient at acquiring new customers, and its CAC payback period checked in at 36.2 months this quarter. The company’s relatively fast recovery of its customer acquisition costs gives it the option to accelerate growth by increasing its sales and marketing investments. 
One Reason to Be Careful:
Customer Retention Numbers Lag Behind Peers
One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.
Braze’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 110% in Q1. This means Braze would’ve grown its revenue by 10% even if it didn’t win any new customers over the last 12 months.
Braze has a decent net retention rate, showing us that its customers not only tend to stick around but also get increasing value from its software over time.
Final Judgment
Braze has huge potential even though it has some open questions, and with the recent surge, the stock trades at 3.7× forward price-to-sales (or $31.41 per share). Is now a good time to buy despite the apparent froth? See for yourself in our comprehensive research report, it’s free.
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