by Ian Harvey
December 09, 2019
Coupa Software beat analysts' expectations for both revenue and earnings last week; but shares still fell.
“Stock Options Made Easy” members have taken a new options trade as COUP recovers lost ground.
Find out where Coupa is headed!
COUP, a cloud-based management system that helps clients control spending, saw its shares down Tuesday morning after it posted third-quarter earnings on Monday evening. The business spend management software provider's stock dipped more than 6% before recovering later in the afternoon to settle at around $146 per share, 1.76% off the previous day's pre-earnings close.
The stock's decline was unexpected given the company beat analysts' expectations for both revenue and earnings. Shares of Coupa Software are now up 134% year to date. Over the same period, the S&P 500 Index has gained about 25%.
The company has invested heavily in global expansion over the last several years. The strategy appears to be paying off as the latest quarterly results indicate growth could continue for the foreseeable future.
YOU NEED TO BE IN TO PROFIT!
What is Coupa Software?
Rob Bernshteyn, CEO of Coupa Software, explains that the name stands for "comprehensive, open, user-centric, prescriptive and accelerated" procurement and expense management, but what they really deliver is value as a service.
Companies can track expenses with Coupa, they can even get preferential treatment and pricing from select suppliers. The company's platform also alerts companies to suppliers that have had less-than-stellar reputations in the past.
The Earnings Report…..
Coupa Software posted earnings of 20 cents per share for the third quarter, topping the consensus estimate of 7 cents. This represented a 150% increase from 8 cents in the year-ago quarter.
Revenue of $101.78 million outperformed analyst estimates by 5.47% after growing from $67.46 million last year. The company continues to witness consistent growth in subscription revenue (up 49% in the October quarter to $90.2 million), which accounts for more than 88.6% of the overall top line. On the other hand, professional services and other revenue, which account for about 11.4%, soared 68% to $11.6 million.
Coupa Software attributed the improvement in the top line to the rapid adoption of its business spend management offerings. During the earnings conference call, management also noted it has now topped the $1.5 trillion mark in cumulative spend under management.
The Coupa earnings report included the recent acquisitions of Hipperos and Exari.
"Organic growth (excluding acquisitions) is steady and while the revenue beat was smaller than usual, the organic beat was fine and billings beat by more than usual," RBC Capital analyst Alex Zukin said in a report to clients. "While we would expect the stock to trade down today due to the combination of high valuation and an optically lower-magnitude beat on revenue and billings, we believe the long-term thesis remains intact, with durable hyper-growth and ramping margins driving consistent out-performance."
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Coupa Software's global expansion appears to be taking shape as it continues to add more brands to its growing portfolio of partnerships. During the third quarter, the company added Cloudflare (NYSE:NET), Maersk Drilling, Deloitte Services, SambaNova Systems and Affinity Education (ASX:AFJ), among others, to its portfolio. More companies continue to integrate Coupa BSM to their cost management processes, which will only boost the company's growth prospects.
Coupa Pay, a product that provides businesses with an end-to-end procedure-to-pay process, is also gaining traction with the likes of Citibank (NYSE:C), Transfermate, Stripe and PayPal Inc. (NASDAQ:PYPL) partnering with the company to facilitate seamless domestic and cross-border business-to-business payments.
Notably, American Express is the latest virtual card partner for the company’s BSM platform.
At Inspire'19 EMEA event in London, the company announced new
capabilities for Coupa Supplier Insights and Coupa Source Together. Moreover,
the company strengthened Coupa Pay solution with support for Expense Payments.
The company also rolled out Coupa CLM Advanced on synergies from integration of Coupa BSM platform with Exari's technology.
We believe that innovation and product enhancements will enable Coupa Software to strengthen its position in the BSM market amid ongoing digital transformation.
On Tuesday last week, the company also announced it has been selected by German automaker BMW (XTER:BMW) to digitally transform its spend management system using Coupa BSM. According to the report, "Coupa will deploy its BSM platform globally across BMW Group to help harmonize and optimize the automaker's purchasing processes and increase efficiency and effectiveness across all products."
For the current quarter ending in January 2020, Coupa forecast revenue of $102 million at the midpoint of its guidance vs. estimates of $99.4 million. In addition, the company said it expects profit in a range of 3 cents to 6 cents a share on the next Coupa earnings report. Analysts projected a 1-cent loss per adjusted share.
Coupa Software had its price target boosted by Citigroup from $141.00 to $162.00 in a research report sent to investors on Wednesday morning. The firm currently has a neutral rating on the technology company’s stock.
Coupa Software had its target price raised by investment analysts at Morgan Stanley from $146.00 to $151.00 in a report released on Tuesday. The firm presently has a “weight” rating on the technology company’s stock. Morgan Stanley’s price objective indicates a potential upside of 0.45% from the stock’s previous close.
Raymond James restated their outperform rating on shares of Coupa Software in a report released on Tuesday morning. Raymond James currently has a $170.00 target price on the technology company’s stock, up from their prior target price of $150.00.
Nine analysts have rated the stock with a hold rating and fifteen have assigned a buy rating to the company’s stock. The company has a consensus rating of Buy and a consensus target price of $160.35.
Based on the earnings report and a positive outlook Coupa Software should continue to climb upwards!
What to do now?
AS ALWAYS THE DECISION IS YOURS!
An Important Note: That any suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.
It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented. GREED can be the undoing of a nice profit!