On Wednesday, Barclays (LON:BARC) upgraded shares of Klaviyo Inc (NYSE:KVYO) from Equalweight to Overweight and increased the price target to $29 from the previous target of $25. The adjustment reflects the firm's optimistic outlook on the company's growth prospects within the software sector.
Klaviyo, known for its robust growth, is projected to see a year-over-year growth of approximately 25% by calendar year 2025 (CY25E). Despite this rapid growth, the company's shares are trading around the same valuation multiple as its SaaS industry peers, at approximately 5 times its expected enterprise value to CY25E sales.
The Barclays analyst highlighted that investors typically seek out software companies for their structural growth potential, and Klaviyo stands out as the fastest-growing entity within Barclays' software coverage. The firm's assessment indicates that Klaviyo's current market valuation does not fully reflect its growth potential when compared to similar companies.
Barclays believes that Klaviyo's stock is trading at a considerable discount on a growth-adjusted basis, which may be an oversight due to the performance of other companies in the front office SaaS space. The firm anticipates that the stock has the potential to re-rate closer to an 8 times enterprise value to CY25E sales multiple, which is more in line with growth expectations.
The upgrade to Overweight and the raised price target to $29 are based on a valuation of 7 times enterprise value to CY25E sales, as per Barclays' analysis. This suggests confidence in Klaviyo's ability to achieve significant valuation improvements in the near future.
In other recent news, Klaviyo Inc. has been making significant strides in its business operations. The company reported robust first-quarter results for 2024, with revenue and adjusted EBIT figures exceeding consensus estimates by 3.9% and 23.0% respectively. Klaviyo's growth trajectory is further bolstered by its strategic partnership with Shopify (NYSE:SHOP), which holds approximately 4.5% of the company. Analysts from firms such as Baird and Mizuho Securities have maintained positive ratings on Klaviyo's stock, despite adjusting their price targets in response to the company's performance and market activities.
Klaviyo has also recently announced a partnership with TikTok, integrating its customer segmentation tools with the social media platform to enhance advertising efficiency for brands. This development is expected to streamline the process of targeting ads and building relationships with potential buyers. Furthermore, Klaviyo's entry into SMS in nine countries and the rollout of new features such as multi-account management systems are projected to drive market share gains.
However, Klaviyo's growth is not without challenges. The company has faced customer concerns over recent price increases and its limited SMS offerings have been noted as a weakness when compared to competitors. Despite these potential roadblocks, the company's strong financial performance and strategic partnerships position it favorably for future growth.
InvestingPro Insights
As Barclays casts a positive light on Klaviyo Inc (NYSE:KVYO), highlighting the company's growth prospects, recent data from InvestingPro complements this perspective. Klaviyo's impressive revenue growth of 43.33% over the last twelve months as of Q1 2024 is a testament to its robust performance in the software sector. Additionally, with a gross profit margin of 75.23%, the company demonstrates strong profitability potential despite not being profitable over the last twelve months. This aligns with the Barclays' optimism regarding the company's structural growth potential.
InvestingPro Tips reveal that Klaviyo holds more cash than debt on its balance sheet and has liquid assets that exceed short-term obligations, suggesting a solid financial position. Moreover, while the company is trading at a high Price / Book multiple of 6.37, analysts predict Klaviyo will be profitable this year, which could justify the current valuation and support a potential re-rating as anticipated by Barclays.
For investors looking to delve deeper into Klaviyo's financials and future prospects, there are additional InvestingPro Tips available. Using coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking further insights into Klaviyo's market position and investment potential.
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