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On Monday, Keefe, Bruyette & Woods (KBW) updated their financial outlook on Blend Labs (NYSE:BLND), increasing the price target to $4.00 from the previous $3.50, while maintaining a Market Perform rating on the company’s shares. The adjustment reflects a more positive view of the company’s recent performance and future prospects.
KBW analyst Ryan Tomasello noted Blend Labs’ non-GAAP operating income surpassed both KBW and consensus estimates, attributing the success to reduced operating expenses. Despite Blend Labs’ second-quarter revenue guidance falling 5% short of consensus expectations, its operating income guidance met predictions. Tomasello highlighted Blend Labs’ significant growth, with a record number of first-quarter closings, three times higher than the previous year, and a robust start to the second quarter. The company’s pipeline has nearly doubled year-over-year, and its remaining performance obligations (RPO) have seen a 70% increase from the previous year, with a 29% sequential rise. InvestingPro data reveals the company maintains strong liquidity with a current ratio of 2.41 and an impressive gross profit margin of 56.66%. Get access to 8 more exclusive InvestingPro Tips and comprehensive financial analysis through the Pro Research Report.
The analyst also pointed out Blend Labs’ strategic move to enter into an exclusive process to sell Title365, which is expected to streamline the company’s focus to a pure software model. This potential divestiture is seen as a positive step towards simplifying the company’s narrative for investors.
In light of these developments, Tomasello has made slight adjustments to Blend Labs’ non-GAAP operating income estimates for the years 2025 and 2026. These adjustments take into account minor changes to revenue and operating expenses, as well as the removal of Title365 from the company’s future financials.
In summary, while KBW maintains a Market Perform rating on Blend Labs, the firm is more optimistic about the company’s trajectory, leading to an increased price target. This reflects confidence in Blend Labs’ operational efficiency and growth potential as it focuses on its core software business.
In other recent news, Blend Labs reported a Q1 2025 earnings miss, with an earnings per share (EPS) loss of $0.01, falling short of the forecasted $0.01 gain. The company’s revenue also missed expectations, coming in at $26.77 million compared to the anticipated $43.18 million. Despite these shortfalls, Blend Labs demonstrated a 12% year-over-year growth in platform revenue, reaching $26.8 million, and achieved a record free cash flow of $15.5 million. In other developments, JMP analysts maintained a Market Outperform rating for Blend Labs, projecting positive future growth. The firm’s non-GAAP EPS estimates for 2025, 2026, and 2027 remain higher than consensus, with expected revenue growth in the coming years. Blend Labs is also undergoing strategic shifts, including a move towards a software-first model and the potential sale of its title insurance business. Additionally, the company announced a $50 million renewal and expansion deal with a major financial institution, demonstrating continued confidence in its offerings.
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