2024-02-19 03:05:00 ET
Backblaze (NASDAQ: BLZE) stock price formed a god candle on Friday as investors cheered its strong financial results. The shares jumped to a high of $11.85 on Friday, its highest point since February 22nd. It has risen in the past six straight weeks and has soared by over 220% from the lowest point in 2023. This rally has brought its total market cap to over $463 million.
Backblaze is doing well but risks remain
Backblaze is a technology company that provides cloud computing solutions to companies from around the world. According to its website, it provides these solutions to companies like Canal+, Complex Networks, and Fortune. It has over 500k customers globally.
Backblaze published strong results last week that demonstrated that its revenue growth was continuing. Its total revenue jumped by 25% in the fourth quarter to $28.7 million. This growth was mostly because of its cloud storage revenue which jumped by 47% because of its pricing changes.
Backblaze has seen its adjusted EBITDA rise by 6% to $1.6 million. Most importantly, the company believes that its revenue growth will continue in the coming months. Its revenue in the current quarter is expected to be between $29.6 million and $30 million. Its annual revenue is expected to be between $126 million and $128 million.
This revenue growth will be important since the company’s revenue stood at over $40.7 million in 2019 and $102 million in 2023. The challenge for the company is that its losses are still expected to remain this year. The management believes that its cash will be $20 million, compared to the $33.4 million it ended the quarter with.
There are other potential challenges that Backblaze faces. First, demand for cloud storage is slowing now that the industry has matured. We saw this last week after Dropbox published weak financial results. The other risk is that the company’s churn could increase in the coming months because of its price increases. Its retention rate stood at 91% in the last quarter.
Further, there is a risk about its losses and the fact that the company competes with companies with unlimited resources like Google, Microsoft, and Amazon.
Backblaze stock price forecast
Turning to the weekly chart, we see that the BLZE share price bottomed at $3.78 in 2022 and 2023. It has failed to move below that level in a while, signaling that it was in the accumulation phase of Wyckoff Method. It has now moved into the markup phase and flipped the important resistance point at $8.18, the highest swing in January 2023.
Backblaze stock has jumped above the 25-week moving average while the Average Directional Index (ADX) has jumped to the extreme greed zone of 82. The Average Directional Index (ADX) has moved to 35, its highest point on record.
Therefore, the outlook for the stock is mildly bullish, with the next reference level being at $15. A drop below the support at $8.18 will invalidate the bullish view.
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