Andrew Lange: We see Blackbaud trading at a healthy discount to our recently revised fair value estimate of $87.
We assign Blackbaud a wide economic moat due to high customer switching costs and intangible assets based on its broad suite of essential relationship-management software and deep knowledge and expertise within the social good community.
The firm's pedigree as a leading on-premises software provider has changed in recent years with management committing to a cloud-based business model transition. Although we expect some near-term lumpiness in Blackbaud's financial performance due to the transition, we think the firm's ability to maintain its industry-leading longevity remains secure, and we see better lifetime value from customers as they move to Blackbaud's cloud platform.
As Blackbaud focuses on selling integrated cloud solutions to its respective markets, we think the firm can reinforce the stickiness of its solutions as it becomes easier for clients to add additional products. While it is early days in the firm's transition to integrated cloud solutions, we think client conversations are now a return on investment discussion rather than a point product sale.
Overall, given Blackbaud's leading products, niche markets, and sticky products, we see the firm as well positioned for the future.