This under-the-radar customer engagement platform can rally more than 40% with the help of A.I., Goldman says

Published Fri, Jun 9 202310:09 AM EDTUpdated Fri, Jun 9 20231:05 PM EDT

Generative artificial intelligence will help Braze win market share, according to Goldman Sachs. Analyst Gabriela Borges reiterated her buy rating on the customer engagement platform. Her $48 price target implies the stock could rally 41% from Thursday's close. "We believe that Generative AI is the next catalyst in a series of catalysts for organizations to switch from 'old' to 'new' technology," Borges said in a Friday note. "… We believe Braze as a company and the management team as a leadership group are some of the most forward-looking in the Software industry." Shares surged more than 17% in trading following the upgrade. Borges said Braze will be a net beneficiary from AI because it has a unique pricing model based on monthly active users as opposed to seats. AI should help increase the number of monthly users and increase monetization, she said. She also said the fact that Braze was early to build integrations for GPT and DALL-E for content and image generation has prompted more use and experimenting within the no-code environment. Braze's combination of cross-channel use, built-in experiences and first-party data combined help separate it from competitors, the analyst said. Borges also noted the company has had machine learning-based, automated tools for decision-making embedded for years that have already been monetized through add-ons. Ultimately, she said companies do not want to be behind on technology and will thus work with those that are deemed to be forward-thinking. "The fear of having the wrong legacy technology stack is enhanced in C-Suites in this environment given the pace of innovation that we see in the marketplace today — we believe this will nudge prospective customers to move quicker and have conversations earlier with more forward-looking vendors like Braze," Borges said. "While management is not messaging that this is leading to an acceleration in near-term buying decisions, these discussions are helping the top of the funnel today, and we look for this momentum to continue." Braze posted a smaller-than-expected first-quarter non-GAAP loss Thursday. Revenue also topped estimates and the company's forecast was solid. Borges expects the company should continue to beat earnings and raise estimates. — CNBC's Michael Bloom contributed to this report.