Morgan Stanley highlighted its top software pick in a note on Tuesday, citing accelerating growth, attractive valuation, and limited downside risk amid a broadly weak software sector.

Blackline Inc. is the stock in question. Analyst Chris Quintero said that “sentiment and valuation have been even more washed out,” with the average Office of the CFO stock down 39% over the past year versus 23% for software, creating what he described as “limited downside risk for these key systems of record.” 

He added that Morgan Stanley prefers “idiosyncratic growth acceleration stories like Top Pick BL.”

Quintero believes BlackLine’s annual recurring revenue (ARR) is poised for an inflection point. 

He noted that “with ~$4M of deals slipping out of Q3, only an additional ~$10M of CC NNARR is needed to accelerate ARR growth to 9% vs the $15M added in 4Q24.” 

He also highlighted management guidance, writing that the company “already said they were comfortable with consensus’ 9% total revenue growth in FY26,” and that checks suggested a “strong close to Q4 and over double digit uplift on customers moving to the new pricing model.”

Valuation is another supporting factor, according to Morgan Stanley. 

Quintero concluded: “With the stock at an attractive 13X CY27 FCF, we reiterate OW and Top Pick.”