We all get advertisements that we don’t want via email and text — many of them from the digital-marketing platforms businesses use to promote themselves online. But Wall Street analysts on Monday said one such platform, Klaviyo Inc., can rise above the spam.
Stock analysts at TD Cowen, Needham, William Blair and Baird started coverage of Klaviyo on Monday with a buy rating or the equivalent. Of the 10 analyst ratings on the stock that are tracked by FactSet, eight were buy or overweight ratings.
Analysts at William Blair said Klaviyo was “leading the marketing modernization wave” for small to midsize businesses, which are trying to translate piles of consumer data into targeted, and more relevant, promotions that appear in shoppers’ inboxes.
“Klaviyo has established a dominant position as the leading marketing platform in its core segments — [small and midsize businesses] and mid market businesses in the retail/e-commerce vertical,” they said.
Shares of Klaviyo were up 2.6% on Monday. However, as with other recent initial public offerings, such as those of Instacart
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and Arm Holdings
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Klaviyo shares are lower than where they were on their trading debut.
Klaviyo went public last month. It was profitable during the first half of the year, when it had more than 130,000 customers, and it has pitched itself as an easier-to-use automated marketing service that puts all of a business’s customer data in one place.
But many businesses have remained conservative on their tech and digital-ad spending as they wait for clearer signals about the economy. They also face concerns from customers and regulators about privacy, as well as irritation with spam. The company has some big rivals — like MailChimp, Braze Inc.
BRZE,
Adobe Inc.
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and Salesforce Inc.
CRM,
— and some analysts have said Klaviyo’s multiyear partnership with Shopify Inc.
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left it with significant exposure to challenges that company faces.
But analysts at Needham on Monday said that as businesses abandon less sophisticated marketing technology, Klaviyo stands to benefit.
“We think [Klaviyo] can sustain its growth at an above-average rate as its customers abandon legacy Mar-tech stacks that cannot pivot properly to engage consumers in multi-channel commerce opportunities,” analysts at Needham said.
They said consulting company Gartner estimated that businesses currently spend $25 billion on marketing software and $13 billion for multichannel marketing, and that the company had more to offer than other software-as-a-service platforms broadly.
“We see Klaviyo’s financial metrics as uniquely more desirable when compared to today’s broader public SaaS universe, especially given the current macro backdrop,” they continued.
Analysts at TD Cowen said the company’s data infrastructure, which allows it to process real-time data to help businesses develop more precise marketing campaigns, helped the company stand out. With 54% sales growth in the first half of this year and an operating margin of around 14%, they said, Klaviyo had “moved into the pole position as the leading modern vendor for email marketing” for small to midsize businesses.
William Blair analysts, however, noted that the stock was trading at 10 times its revenue, with its peers generally trading a bit lower, and said that Klaviyo’s small-businesses customers were generally on more fragile footing, particularly in the event of a downturn.
At Baird, analysts saw potential for the company to offer a wider array of services to customers. But they also cited its relationship with Shopify as a risk and said “price sensitivity could become an issue as lower-cost competitors enter the market.”
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