Morningstar | Blackbaud’s Wide Moat Remains Steady Even With Near-Term Lumpiness; Lowering FVE to $87
After reassessing our long-term view on Blackbaud’s growth and margin profile, we are lowering our fair value estimate to $87 per share from $102. However, we retain our wide economic moat rating due to high customer switching costs and intangible assets based on the firm’s broad suite of essential relationship-management software and deep knowledge and expertise within the social good community.The company provides market leading software that supports nonprofits, healthcare organizations, and educational institutions. The firm’s pedigree as a leading on-premises software provider has changed in recent years with management committing to a cloud-based business model transition. Although we expect some near-term lumpiness in Blackbaud’s financial performance due to the transition, we think the firm’s ability to maintain its industry-leading longevity remains secure and we see better lifetime value from customers as they move to Blackbaud’s cloud platform.
As Blackbaud focuses on selling integrated cloud solutions to its respective markets, we think the firm can reinforce the stickiness of its solutions as it becomes easier for clients to add additional products. With the addition of multiple products, such as payments or analytics, we believe the firm’s client retention rates can increase into the mid- to high-90s from the low- to mid-90s. While it is early days in the firm’s transition to integrated cloud solutions, we think client conversations are now a return on investment discussion rather than a point product sale.
The company is looking to aggressively ramp its sales headcount and create an environment where there is better delegation between sales hunters and farmers. While existing client sales have driven the firm, management is keenly aware that it needs to focus on selling to new customers to continue to drive healthy long-term organic growth. Given its market-leading products, we think it will be an attractive vendor for prospective clients.
Blackbaud is a cloud software company. The company is engaged in providing software solutions in cloud and hosted environments, providing payment and transaction services, providing software maintenance and support services, and providing services, including implementation, consulting, training, analytic and other services. The company's portfolio provides fundraising and relationship management, marketing and engagement, financial management, grant and award management, organizational and program management (such as education management, church management and ticketing), social responsibility, payment services and analytics.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.