Digital engagement company Bridgeline Digital, Inc. (BLIN) offers a unified and scalable platform to enable businesses to create websites, publish content via a browser-based interface and other web design, and development services. BLIN’s eCommerce360 strategy has accelerated the company’s sales and growth opportunities significantly. Its revenue from software as a service (Saas) subscriptions and perpetual licenses increased 8% year-over-year to $1.99 million, driven by significant multi-year license renewals across its diverse portfolio of Fortune 500 companies. BLIN is based in Burlington, Mass.
BLIN’s stock has gained 141.4% over the past month on news that its site search network Hawksearch had won multi-year contracts. But while the acquisition of Woorank SRL and Hawk Search, Inc. should result in faster customer wins and help accelerate its services revenue, the company has suffered significant operational and net losses in its last reported quarter because of higher restructuring and acquisition-related expenses.
The stock is currently trading 59% below its 52-week high of $14.38, which it hit on July 6. We think BLIN’s mixed growth potential and profitability make the stock’s near-term prospects look uncertain now.
Here is what we think could influence BLIN’s performance in the coming months:
Increasing Demand for Site-Search Platform
This month, BLIN announced that a global management company in the industrial sector had selected Hawksearch, an industry-leading site search, to enhance customers’ operations by improving the digital experience. Also, on July 13, a government agency in Singapore signed a three-year agreement with Hawksearch to provide a personalized and intelligent search for all site visitors.
Furthermore, a global footwear company has recently selected BLIN’s Celebros Search platform to streamline its online experience and drive greater traffic. In May, a long-standing Northern Irish department store returned to its Celebros Search platform to deliver a stellar business experience to its customers and regain online business.
Mixed Growth Story
BLIN’s revenue is expected to increase 44.5% for the next quarter, ending September 2021 and 18% in its fiscal year 2021. But analysts expect the company’s EPS to decline 116.7% for the next quarter and remain negative in 2021 and 2022. Also, the stock failed to beat the Street’s EPS estimates in two of the four trailing quarters.
Although BLIN’s total assets increased at a 1.4% CAGR over the past three years, its revenue declined at an 11.6% annualized rate over this period.
Although BLIN’s total revenue rose 5% year-over-year to $2.87 million for the first quarter ended March 31, 2021, its digital engagement services revenue declined 2% from its year-ago value to $885,000. While its gross profit rose 16% year-over-year to $1.81 million, its research and development expenses surged 12% from the prior-year quarter to $479,000. Consequently, BLIN reported a $127,000 loss from operations and a $556,000 net loss over this period.
The company’s 63.9% trailing-12-month gross profit margin is 31.5% higher than the 48.6% industry average. In addition, its 0.8% asset turnover ratio is 20.6% higher than the 0.6% industry average. But BLIN’s net income margin, ROE, and ROA came in at negative 21.3%, 46.7%, and 13.1%, respectively.
Consensus Price Target Indicates Potential Downside
Currently trading at $5.89, Wall Street analysts expect the stock to hit $5.25 in the near term, indicating a 10.9% potential decline.
POWR Ratings Reflect Uncertainty
BLIN has an overall C rating, which translates to Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. BLIN has a B grade for Value. The stock’s 3.21 EV/Sales ratio, which is 19.4% lower than the 3.99 industry average, is consistent with its value grade.
In terms of Quality Grade, BLIN has a C. This is in sync with its mixed profitability.
However, BLIN has a D Sentiment grade. Analysts’ expectations that its EPS will decline in the next quarter, ending September 2021, justifies the Sentiment grade.
In addition to the grades we’ve highlighted, one can check out additional BLIN ratings for Momentum, Growth, and Stability here. BLIN is ranked #28 of 60 stocks in the D-rated Software – Business industry.
Click here to view the top-rated stocks in the Software – Business industry.
Even though multi-year license agreements and growing adoption of the company’s search platforms could benefit it significantly, given its uncertain growth potential and large losses, BLIN’s stock could see a decline in the near term. So, we think it is wise to wait for better entry points in the stock.
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BLIN shares were trading at $5.61 per share on Tuesday morning, down $0.28 (-4.75%). Year-to-date, BLIN has gained 117.44%, versus a 14.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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