Morgan Stanley Upgrades BlackLine Stock to Overweight, Sets Price Target at $70 - What This Means for Investors
On Monday, Morgan Stanley upgraded BlackLine (NASDAQ:) stock from Equalweight to Overweight and raised the price target to $70.00 from $60.00. The firm believes that BlackLine's current trading position, at a discount of over 35% compared to its peers, presents a favorable outlook for the company.
The optimism from Morgan Stanley stems from the anticipation that BlackLine's margin expansion trajectory is not fully appreciated by the market. The firm suggests that BlackLine's management is likely to revise their margin targets upward at the upcoming Investor Day on November 19th.
Morgan Stanley has raised its Free Cash Flow (FCF) estimates for BlackLine to the highest levels among Wall Street predictions. It projects a 32% compound annual growth rate (CAGR) in FCF through 2026, with FCF margins reaching 22%, 25%, and 29% for fiscal years 2024, 2025, and 2026, respectively.
The financial institution's analysis indicates that BlackLine's stock is trading at approximately 13 times the enterprise value to CY26 Free Cash Flow based on the new FCF estimates, significantly lower than the average of SMID-cap peers. This suggests that investors may not be fully recognizing the company's potential for margin growth.
In other news, BlackLine reported strong Q2 2024 earnings, with revenue of $161 million and a non-GAAP net income of $43 million. The company also appointed David Henshall to its Board of Directors.
Baird has maintained a positive outlook on BlackLine, with an Outperform rating and a price target of $65. The firm anticipates potential share price growth based on upcoming events.
In terms of investment activity, Soros Capital Management sold off its stakes in Microsoft and Advanced Micro Devices, while Jana Partners established a new position in BlackLine Systems. The Saudi Public Investment Fund increased its U.S. stock holdings.
Looking ahead, BlackLine expects total GAAP revenue for Q3 to be between $162 million and $164 million, indicating 8% to 9% growth.
InvestingPro Insights support Morgan Stanley's optimistic outlook on BlackLine, highlighting the company's revenue growth and strong gross profit margin. InvestingPro Tips suggest that BlackLine's financial health and market position could support potential upward revisions in margin targets.
In conclusion, Morgan Stanley's upgrade of BlackLine stock and the positive outlook from other firms indicate a promising future for the company. Investors should consider these factors when making investment decisions, especially with the upcoming Investor Day on November 19th.
