Shareholders of Braze would probably like to forget the past six months even happened. The stock dropped 37.2% and now trades at $28.19. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Given the weaker price action, is now an opportune time to buy BRZE? Find out in our full research report, it’s free.
Why Does BRZE Stock Spark Debate?
Founded in 2011 after the co-founders met at NYC Disrupt Hackathon, Braze (NASDAQ:BRZE) is a customer engagement software platform that allows brands to connect with customers through data-driven and contextual marketing campaigns.
Two Positive Attributes:
1. ARR Surges as Recurring Revenue Flows In
While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.
Braze’s ARR punched in at $619.6 million in Q1, and over the last four quarters, its year-on-year growth averaged 23.1%. This performance was impressive and shows that customers are willing to take multi-year bets on the company’s technology. Its growth also makes Braze a more predictable business, a tailwind for its valuation as investors typically prefer businesses with recurring revenue. 
2. Operating Margin Rising, Profits Up
Many software businesses adjust their profits for stock-based compensation (SBC), but we prioritize GAAP operating margin because SBC is a real expense used to attract and retain engineering and sales talent. This is one of the best measures of profitability because it shows how much money a company takes home after developing, marketing, and selling its products.
Over the last year, Braze’s expanding sales gave it operating leverage as its margin rose by 8.5 percentage points. Although its operating margin for the trailing 12 months was negative 19.7%, we’re confident it can one day reach sustainable profitability.
One Reason to be Careful:
Mediocre Free Cash Flow Margin Limits Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Braze has shown mediocre cash profitability over the last year, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 5%, subpar for a software business.
Final Judgment
Braze’s positive characteristics outweigh the negatives. With the recent decline, the stock trades at 4× forward price-to-sales (or $28.19 per share). Is now a good time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More Than Braze
Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.
While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.