What happened
Shares of e-commerce software company Riskified (RSKD 0.10%) popped on Friday, even though the stock market was slumping, after receiving a big upgrade from a prominent analyst. As of 9:45 a.m. ET, Riskified stock was up about 10% but it had been up as much as 14%.
So what
Last week, Riskified's team met with analysts from Piper Sandler, according to The Fly. Today, Piper Sandler analyst Brent Bracelin said he believes Riskified stock is worth buying, according to TipRanks, giving it a price target of $8 per share. This implies over 30% additional upside from here.
Through its software, Riskified attempts to approve more transactions for its e-commerce customers while simultaneously reducing fraud. The stock has fallen since it went public in 2021 because some investors question how effective the software is. But Bracelin is apparently more optimistic about the company's progress.
Now what
There is reason for optimism. Yesterday, Riskified issued a press release about one of its customers, Gametime. Transactions are up for Gametime, as are satisfaction scores from its customers, potentially pointing to the growing effectiveness of Riskified's services. For perspective, Riskified uses machine learning in its software, so its software is constantly in a state of change.
In Riskified's case, gross margin can be a good way of measuring the effectiveness of its software and contextualizing announcements like yesterday's regarding Gametime. In 2022, the company had a gross margin of 52% and it expects a gross margin of 51% to 52% in 2023.
Therefore, Riskified still has more work to do to meaningfully improve its service and be a good long-term investment. But there are some encouraging signs nonetheless.
