Against all odds, stock markets have managed to roar through the first quarter of the year, seeing all major indexes closing off the final trading week of the quarter on new highs despite high levels of uncertainty, inflationary pressure, and the high-interest rate environment.
On Wednesday, March 27, the benchmark S&P 500 rose 0.53%, pushing total quarterly gains to roughly 10% for the first quarter of 2024. Since late January, the benchmark index has been setting new records and hasn’t looked back ever since. The index is now on track to clock in its biggest first-quarter gain since 2019.
Similarly, both the Dow Jones Industrial Average and the tech-heavy Nasdaq Composite reported similar gains, with the Dow Jones rising 0.40% and the Nasdaq up 0.40% during late Wednesday afternoon trading.
Both the Dow Jones and Nasdaq have added 5.61% and 10.73%, respectively since the beginning of the year, something which has gotten many Wall Street analysts excited.
In fact, many fund managers, roughly 62 percent, have said that they are now expecting a “soft landing” to be the outcome for the economy in the next 12 months. Still, 11% of fund managers have said that they expect a “hard landing” following a Bank of America Global Research report published earlier in March.
The current market sentiment could leave wide-eyed investors stepping into the new quarter with a sense of optimism last witnessed before the pandemic.
Yet, high-interest rates are keeping a damper on things, at least that could be the case in the short-term, as Wall Street awaits new key inflation data and potential news from the Federal Reserve of the central bank starting to cut back on rates in the coming months. However, when that will happen remains a mystery to be solved later in the next quarter.
Blackline pushing its bottom line
All of the current market sentiment had me wondering about some of the few under-the-radar players that have managed to report tremendous performance throughout the quarter and much of the final stretch of last year.
It didn’t take a lot, but one company name that stood out among the crowd is Blackline (NASDAQ: BL), a market-leading cloud and customer service platform that assists companies with automating their accounting activities while leveraging key data processes to drive efficiency and reduce repetitive work.
Considering their business structure, which seems to mirror those of Sage, FreshBooks, NetSuite, Xero, and QuickBooks – Blackline has a more subtle approach to their market, mostly targeting mid-sized enterprises, but mixing this up with a few larger corporate brands.
Nonetheless, Blackline has done a good enough job to garner a few big-league clients, which has helped them to raise their Q4 2023 GAAP revenue by 11% compared to Q4 2022.
The steady performance could be attributed to the company’s ability to raise its overall operating margin from 2.3% during the fourth quarter of 2022 to roughly 8.2% for the same quarter in 2023.
That’s a fairly positive jump considering the majority of corporate companies have started backpedaling on their expenses throughout much of last year as costs continue to rise and sink their teeth into their profits.
For the fourth quarter, the company reported a strong $35.3 million in free cash flow, which represented a $15 million jump compared to the $20.3 million reported for Q4 2022. Similarly, operating cash flow was steady, closing the quarter at $42.2 million, almost $20 million more than the $25.8 million reported a year earlier.
On a full-year basis, these figures look fairly the same. Total revenues were up by 13% to $590 million, while their operating margin of 2.4% was below the 10.7% reported in 2022.
Where is all of this performance coming from you might wonder?
Well, for starters, Blackline added about 30 new customers during the fourth quarter, which helped them close off the final month of the year with a robust 4,398 customers in total. Additionally, there was solid growth within their user base, which as of December 31, 2023, stood at more than 386,800 users.
Why does this all matter?
There’s a lot to say about Blackline and where the company could be heading in the next several months, however, a closer look at the company’s valuation model showed that it’s priced at 1.30% above ordinary intrinsic value, according to some analysts’ data.
These findings make BlackLine a fairly affordable, but reasonable purchase for investors looking to have a relatively safe stock option that can provide them with a solid return in the near future.
Throughout the final trading week of the first quarter, Blackline managed to find itself caught up in all the excitement, seeing BL stocks adding roughly 2.10% within one day of trading, and performance moving closer to their peak of the year, which was $68.65 earlier in March.
Currently, stock prices are sitting between $63.64 – $64.16 on a day range, and could advance again during the opening bell of the second quarter.
Something else to consider when looking at Blackline against the broader market is that BL has a remarkably low beta, which makes it less volatile compared to the broader market. This could be a key selling point for BL, especially in the case of investors looking to have those muted gains without having to put too much risk on the table.
Finally, there is some good news for investors who are looking to make a turnaround with BL in the coming weeks.
Earlier in the year, in January, analysts at Goldman Sach raised their price target from $49.00 to $54.00 per share giving the stock a “Sell” rating. The same was seen with Piper Sandler which dropped its price target range from $60.00 to $55.00. while JPMorgan Chase had a similar objective and lowered their target from $55.00 to $52.00 per share.
Additionally, JPMorgan said that BL has an underweight rating and that although many analysts have mixed emotions regarding Blackline, many ended their argument by saying that there is a slight chance for shares to begin climbing again in the near future, however until then, the stock had received a “Hold” rating.
Still, several weeks after these research notes were first sent out by analysts, Blackline continues to have a “Hold” rating, although it’s possible to see some speculative changes taking shape in the coming months, which could be more clear once the company announced their Q1 2024 financial results.
So what’s the takeaway from all of this?
Blackline is giving investors a hard time to decide whether they should stay and wait it out, or rather drop it all off and move on to the next thing. One might argue that BL is treading close to speculation territory, however only time will tell.
Until then, it’s possible to see that Blackline could give investors a positive turnaround in the coming months as it rides out the wider market performance and overall positive sentiment being shared across Wall Street. Whether we could see higher prices in the near future would depend on what the company will be doing next to boost its footprint in the domestic market, and which customers it’s looking to target.
