BlackLine Downgraded on Premium Valuation, Expensify Upgraded on Lean Model - BofA

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BlackLine Downgraded on Premium Valuation, Expensify Upgraded on Lean Model - BofA
Credit: © Reuters.

By Sam Boughedda

BofA analyst Koji Ikeda re-rated shares of accounting software companies BlackLine Inc (NASDAQ: BL ) and Expensify Inc (NASDAQ: EXFY ) in a note to investors Monday.

Shares of BlackLine were downgraded to Underperform from Neutral, with the firm's price target on the stock lowered to $64 from $75.

The analyst explained that while they are fans of the company and its management team and believe BlackLine has the long-term potential to disrupt, they see its "premium valuation of 7.5x EV/C23e revenue, 0.39x EV/R/G, compared to its horizontal software peers at 6.2x/0.29x, is pricing in all of the potential good news over the NTM, which also includes some potential M&A premium."

"Given BL’s premium valuation, we believe further share gains from current price will need to come from higher estimates vs. multiple expansion," said Ikeda.

Shares of BlackLine plunged 9.3% during Monday's session.

Meanwhile, Expensify was upgraded to Buy from Neutral, with a $25 per share price target.

Ikeda listed five reasons for the upgrade, including a lean business model, the fact it is more tied to total expense management vs. travel, an attractive freemium model well suited for VSBs, competitive pressures potentially easing, and the VSB/SMB end-market likely being better prepared for 2023 vs. 2020.

"We believe Expensify is best positioned to take share in the VSB segment with its freemium model and the ability to scale with customers with add-on monetization opportunities. Brex exiting the SMB space should ease competitive fears too," wrote Ikeda.

Expensify stock jumped more than 11.8% Monday.

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