Backblaze stock price target cut to $11 at B.Riley

Tuesday, B.Riley analysts adjusted their outlook on Backblaze Inc (NASDAQ:BLZE), reducing the price target to $11 from the previous $11.50, while still maintaining a Buy rating on the company’s shares. Currently trading at $7.25, the stock sits well below the broader analyst target range of $10-$15.90. The revision comes ahead of the cloud storage company’s fourth-quarter earnings report, which is set to be released after the market closes on Tuesday, February 25, 2025. According to InvestingPro data, 4 analysts have recently revised their earnings expectations downward, though analysts expect the company’s performance to align with management’s guidance and consensus expectations.

In the lead-up to the earnings announcement, Backblaze’s year-over-year revenue growth is projected to slow down, with a 17% increase in the fourth quarter of 2024 compared to a 29% rise in the third quarter. The company has demonstrated strong historical growth, with revenue increasing 27.41% over the last twelve months to $122.58 million, while maintaining a healthy gross margin of 53.78%. This deceleration is attributed to the company cycling through previous pricing benefits. During the third-quarter earnings call, Backblaze management had highlighted key strategies aimed at transforming the go-to-market approach and reducing operational expenses, including a headcount reduction of approximately 12% in the fourth quarter, which is anticipated to save over $8 million annually.

Moreover, Backblaze has recently concluded a follow-on public stock offering that raised approximately $37.5 million. This capital increase is particularly crucial as InvestingPro analysis indicates the company’s short-term obligations currently exceed liquid assets. This capital increase is intended to strengthen the company’s balance sheet and support management’s execution of strategic transformation initiatives. Analysts from B.Riley foresee these measures contributing to a rebound in revenue growth and a significant expansion of adjusted EBITDA margins, targeting a 20% margin by the fourth quarter of 2025. They also predict a positive turn in adjusted free cash flow during the second half of 2025.

B.Riley analysts have maintained their fiscal year 2025 estimates for Backblaze, which align with general consensus, and have introduced projections for fiscal year 2026. These forecasts include a modest acceleration in year-over-year revenue growth and continued benefits from the cost structure optimization. The slight reduction in the price target to $11.00 is ascribed to the dilutive effects of the recent equity offering, with the valuation based on an unchanged forward EV/sales multiple of approximately 3.5 times for fiscal year 2025. Despite the adjustment, B.Riley’s analysts reiterate their positive stance on Backblaze’s stock, backed by the expected improvement in key financial metrics in the latter half of 2025. For a comprehensive analysis of Backblaze’s valuation and growth prospects, investors can access detailed financial health scores and additional ProTips through InvestingPro’s extensive research reports.

In other recent news, cloud storage and data backup service provider, Backblaze, has seen significant developments. The company terminated its revolving credit agreement with City National Bank, following the successful completion of a follow-on public offering in November 2024. This offering allowed Backblaze to secure approximately $37.5 million in net proceeds, providing the liquidity necessary to repay the credit in full. This move marks a shift in the company’s capital structure and liquidity strategy.

Simultaneously, Backblaze has implemented amendments to its bylaws to streamline operations and clarify existing procedures. Notably, the response time from the company’s Secretary to a nominating stockholder’s request for a written questionnaire has been reduced from 10 days to five business days. Additionally, the bylaws have been adjusted to ensure compliance with Rule 14a-19 under the Exchange Act and the provision allowing the Chief Executive Officer to call a special meeting of the stockholders has been eliminated.

These are recent developments that investors may find crucial as they reflect on Backblaze’s financial health and strategic initiatives. The company has yet to disclose any immediate plans for the use of the newly raised capital, and the changes in the bylaws do not indicate a shift in the company’s strategic direction but rather an alignment with regulatory compliance and enhanced corporate governance standards.

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