Blackbaud (BLKB – Research Report), the Technology sector company, was revisited by a Wall Street analyst today. Analyst Koji Ikeda from Bank of America Securities reiterated a Sell rating on the stock and has a $60.00 price target.
Koji Ikeda’s rating is based on several factors that suggest Blackbaud may face challenges ahead. Despite reporting decent first-quarter results with revenue and adjusted EBITDA surpassing expectations, the reaffirmation of the 2025 guidance raises concerns. This decision might be perceived as a potential downgrade, which could negatively impact investor sentiment. Additionally, while Blackbaud achieved its near-term target with a Rule-of-40 profile, it is expected to underperform compared to its peers in terms of growth and free cash flow margins.
Another factor contributing to the Sell rating is the potential risk associated with Blackbaud’s transactional revenue stream, which constitutes a significant portion of its total revenue. Given that 75% of this revenue is derived from donations, there is a concern that it could be vulnerable in an economic downturn. Furthermore, the company’s valuation, based on a forward-looking free cash flow multiple, is at a discount compared to its peers, reflecting anticipated declines in revenue growth and free cash flow margins. These elements combined have led to the reiteration of an Underperform rating with a price objective of $60.