3. Klaviyo, Inc. (NYSE:KVYO)
Number of Hedge Fund Investors in Q1 2024: 22
Analyst Average Share Price Target: $33.93
Upside: 41%
Klaviyo, Inc. (NYSE:KVYO) is one of the more unique cloud companies. It is primarily a content delivery services provider, but unlike others that provide an off the shelf solution, Klaviyo, Inc. (NYSE:KVYO) allows businesses to use their proprietary data and build it on an application to send messages to customers via SMS, email, push notifications, and other mediums. This is an uncommon business model that leaves a sizeable market open for Klaviyo, Inc. (NYSE:KVYO). However, since this model is also the firm’s primary line of business, any changes to standards set by email providers like Gmail or carriers could create headwinds for Klaviyo, Inc. (NYSE:KVYO). Like other cloud companies, its success depends on revenue growth, recurring revenue through customer retention, and cost control. Klaviyo, Inc. (NYSE:KVYO)’s customers also depend on broader consumer strength, so an economic downturn could hit it harder than other cloud stocks. Additionally, the shares have been lackluster in 2024 due to Klaviyo, Inc. (NYSE:KVYO)’s excessive reliance on small businesses for its revenue. These firms often feature fluctuating performance and are highly sensitive to economic slowdowns.
On this crucial front, here’s what Klaviyo, Inc. (NYSE:KVYO)’s management had to say during the Q1 2024 earnings call:
We often think about, when we talk to our customers, what are the kind of nice-to-have piece of software versus what are the must-haves. And from day one, we tried to position Klaviyo as a must-have and — really because we’re driving revenue. Amanda talked about how for our customers, a greater or increasing percentage of their sales are coming through Klaviyo. And we think that there’s two parts that make us a must-have. The first is being the central source of truth about all your customers and being able then to use that, not just with our marketing products, e-mail, SMS, et cetera, but also to use that data in other applications. We’ve got hundreds of applications that plug into Klaviyo, so that centrality really matters.
And then the second part is we built in attribution and the ability to really measure your results. I think if you’re a product that can tie back usage of that product directly to real revenue, real profit, that’s a huge driver. In fact, like when you think about what we’re doing with artificial intelligence, that’s a big part of the story. When we started Klaviyo, the whole idea was better, more personalized experiences that are going to be more engaging that are going to drive more revenue. And now if you extend that with our product strategy, as we invest in AI, we think about that as a big driver of helping businesses increase customer engagement and revenue by being able to run more experiments, being able to optimize the marketing campaigns they’re running.
So I think when budgets get a little bit tighter, everybody kind of looks at which software is a must-have. And I think because we’re driving revenue, we fit in like that.
