Confidence In Blackline Grows As Total Addressable Market Seen Approaching $20 Billion

Cloud-based accounting software maker Blackline Inc BL hosted a user conference this week, which has left sell-side analysts upbeat about the company's prospects.

The Analyst

KeyBanc Capital Markets analyst Brent Bracelin has an Overweight rating on shares, and raised his price target from $39 to $47.

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The Thesis

Following attendance of Blackline's user conference, spending two days with customers, partners and management, Braceline said three compelling growth drivers emerged, increasing his confidence in the sustainability of high growth through 2020.

The catalysts include:

• Increasingly symbiotic relationship between the company and SAP SE (ADR) SAP, which fetches the company 19 percent of its total sales;
• Expansion in the footprint at large enterprises, aided by Deloitte and KPMG; and
• Broader opportunity to automate repetitive accounting functions, opening up a $18.5 billion untapped total addressable market, or TAM, opportunity.

"These new inputs give us an upward bias to the consensus estimate of 28.6% growth in 2018 and reinforce our view that BL should be a core holding for growth investors," Braceline said.

The Price Action

Blackline, which IPOed in late 2016, offering 8.6 million shares at $17 apiece, debuted on Wall Street with a gain of over 39 percent. The shares have done well since, climbing steadily and recording a gain of 36 percent in the year-to-date period.