Blackbaud, Inc. (NASDAQ:BLKB) is a stock a lot of investors aren’t familiar with, which is fine with me. Some of the best opportunities in the market are where Wall Street isn’t looking.
In this case, the company meets all of my NexGen criteria. Starting with the big picture, the company is the world’s leading cloud software company for the nonprofit sector. The word “cloud” continues to generate a lot of interest, but it’s more than a buzzword. The cloud trend is the real deal, making it one of my favorite niche software sectors.
Fundamentally, Blackbaud passes the test, with solid earnings and revenue growth. Earnings are expected to increase from $1.92 a share in 2016 to $2.40 by 2018. Revenue in the most recent quarter increased by 7.4%, and while that may not be eye-popping, the real story can be found when you look under the hood. Subscription revenue, which investors love to see, was up 22% and now accounts for 64% of total revenue. Recurring revenue is now 83% of total revenue, the highest level ever.
When trading, the chart is the most important factor, and I like what I see. BLKB has been very strong since reporting an earnings beat in early February, hitting new all-time highs on a regular basis. As you can see below, the stock did pull back on May 2 after missing on earnings, but the real key here is that it was able to rally and close the day with a minimal loss of just 1%.
The stock is currently holding its short-term support at the 20-day moving average (the green line) and has more support at its 50-day moving average (the blue line, currently at $77). Volume has been bullish, and the Relative Strength Index (RSI, at the top of the chart) is in the neutral zone. It’s not oversold or overbought, suggesting that it should hold support and continue the uptrend. (If you want me to walk you through the chart, you can watch a video of my chart analysis here.)
I expect BLKB to hold those two moving averages and hit a new historic high in the coming weeks. If it’s a trade you’re interested in, just be aware that it is a smaller company ($3.7 billion market cap) with an average of 300,000 shares changing hands each day.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt is currently in the midst of an exciting launch centered around his trademark three-prong investing approach that targets the mega-trends old Wall Street is missing out on. His next-gen investing strategy is delivering enormous profits in stocks and ETFs. Click here for more information on his latest venture.