What Happened?

Shares of accounting automation software maker Blackline (NASDAQ:BL) jumped 5% in the morning session after Morgan Stanley upgraded the stock's rating from Equal-weight (Hold) to Overweight (Buy) and raised the price target from $60 to $70. The new price target represents a potential 25% upside from where shares traded before the upgrade was announced. Despite BlackLine's category leadership, the firm noted that the business trades at "over 35% discount to peers." The firm also acknowledged BL's margin expansion trajectory.

Notably, operating margin has inflected recent quarters, with the company reporting three consecutive quarters of operating profits since 2023. As a result, the firm sees a strong case for management to raise the operating margin target during the 2024 Investor Day session, which should be accretive to BlackLine's valuation and share price. After the initial pop the shares cooled down to $54.98, up 4% from previous close.

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What The Market Is Telling Us

BlackLine’s shares are somewhat volatile and have had 11 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

BlackLine is down 6.8% since the beginning of the year, and at $54.98 per share, it is trading 19.9% below its 52-week high of $68.65 from March 2024. Investors who bought $1,000 worth of BlackLine’s shares 5 years ago would now be looking at an investment worth $1,150.

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