BLZE - Backblaze: Lacking A Competitive Offering As Losses Accumulate
2024-02-08 23:50:13 ET
Summary
- Backblaze has grown well (+26% CAGR), driven by a price-competitive offering and a good quality offering.
- Whilst its ARR continues to grow, we see fundamental issues with its broader offering. It faces stiff competition from the likes of Amazon and lacks any form of material differentiation.
- We expect growth to continue to slow as Management is forced to lift prices. It is burning cash with solvency risk. Shareholders will likely need to fund further losses.
- We suspect a takeover is the only route to saving this company long-term, as we struggle to see how it can differentiate itself without either remaining loss-making or developing a suite of services.
- Backblaze is trading at 4x revenue, which values its revenue generation beyond a reasonable level we feel given the risks highlighted.
Investment thesis
Our current investment thesis is:...
Backblaze: Lacking A Competitive Offering As Losses Accumulate