by Ian Harvey
June 15, 2020
Coupa Software earnings and revenue topped first-quarter analyst estimates while revenue guidance edged by Wall Street targets. Time to buy?
And, Stock Options Made Easy “Earnings Predictions” Members were well-positioned to benefit; and made 225% potential profit based on a CALL OPTIONS trade.
Coup is a big winner, so far this year, up over 50% after its fiscal 2021 first quarter (the three months ended April 30, 2020).
Coup is a business spend management and e-procurement software provider. Though it contends with far larger software companies in this space -- including SAP, Oracle, and WorkDay that offer some overlapping services -- Coupa has consistently been ranked a leader among its peers by tech researchers
Although Coupa Software did take a hit on gross profit margins as well as free cash flow due to some disruption from the pandemic as well as some payments related to its convertible debt, it has made a solid start to what has turned into an ugly year for many.
Initially, Coupa Software stock fell 4% to near $212 in extended trading on the stock market on the day, but after trading opened on Tuesday the stock hit a high of $238.19.
“Earnings Predictions” Members executed a call options trade on Coupa Software on Monday, June 08, 2020, at a cost of $5.80; and the sell value of the option hit $20.60 – a potential profit of 225%.
The recommended options trade for “Armchair Trader Series” Members.....
** OPTION TRADE: Buy the COUP JUN 19 2020 220.000 CALL at approximately $5.80.
The Recommended Trade…..
“Coupa Software Inc (NASDAQ: COUP), a cloud-based management system that helps clients control spending, will report earnings after the market closes. The consensus earnings estimate is for $0.07 per share on revenue of $111.83 million; but the Whisper number is a bit higher at $0.10 per share.
The company's guidance was for earnings of $0.06 to $0.08 per share on revenue of $112.00 million to $112.00 million. Consensus estimates are for year-over-year earnings growth of 450.00% with revenue increasing by 37.48%.
For the last reported quarter, it was expected that Coupa Software would post earnings of $0.05 per share when it actually produced earnings of $0.21, delivering a surprise of +320%.
Over the last four quarters, the company has beaten consensus EPS estimates four times.
Coupa reported full-year fiscal 2020 results back in March. At the time, it showed 48% year-over-year revenue growth, generating $345 million. Most of this was subscription-based revenue. The company's net loss by generally accepted accounting principles widened to $91 million, but it was free-cash-flow positive.
Cloud-based software companies are popular with investors which have helped push Coupa 29.2% higher during May.
The stock has returned 60% year to date, outperforming the industry’s rally of 32.9%.
Robust adoption of Business Spend Management (BSM) offerings and an expanding customer base have benefited Coupa. The coronavirus outbreak has likely bolstered adoption of Coupa Software’s BSM solutions.
Ongoing momentum in solutions such as Accelerate, Invoice payments and Virtual Cards for Pos is likely. It has extended these solutions to partners like American Express, Citibank, Transfermate, Stripe and PayPal.
Smart and efficient spend-control programs that provide enhanced reporting and analytics have been the primary catalyst for Coupa Software’s expanding clientele.
Coupa Software anticipates Subscription revenues between $101.5 million and $102.5 million.
The company anticipates professional services revenues to be approximately $10 million, a growth of 21.9% from the prior-year quarter’s tally.
Europe-based independent oil and gas company, Wintershall Dea, adopted Coupa BSM Platform to automate its end-to-end global procurement process.
An expanding clientele is boosting investors’ optimism in the stock.
The company has been adding new capabilities to Coupa Supplier Insights and Coupa Source Together solutions, which is anticipated to have bolstered adoption, amid coronavirus crisis induced supply chain woes.
Introduction of Coupa CLM Advanced on synergies from integration of Coupa BSM platform with Exari's technology amid ongoing digital transformation is expected to have strengthened the company’s position in the BSM market.”
The Earnings Results…..
Coupa earnings soared 566% to 20 cents per adjusted share for the quarter ending April 30.
Revenue rose 47% to $119.2 million, the company said. Subscription revenue rose 45% to $105.7 million. Analysts expected Coupa earnings of 7 cents a share on revenue of $111.5 million.
A year earlier, Coupa earned 3 cents a share on sales of $81.3 million. The Coupa earnings report included the recent acquisitions of Hipperos and Exari.
For the current quarter ending in July, Coupa forecast revenue of $118.5 million at the midpoint of its guidance vs. estimates of $117 million.
For the full-year, Coupa said it expects revenue of $490 million vs. estimates of $488 million.
In addition, Coupa's core market is selling business spending management software. Further, Coupa's software products cover employee travel and expense management, procurement and invoicing.
Second-quarter revenue guidance implies a 25% rise from a year ago, and full-year fiscal 2021 guidance a 26% increase, which is pretty good especially considering the present environment!
Based on full-year guidance, shares are trading for 28.5 times trailing-12-month revenue. And though the gross margin is high on services rendered as it is with other cloud computing firms, excess cash is reinvested back into the business to maximize growth.
Coupa has ample liquidity on its balance sheet ($706 million in cash and short-term securities, $572 million in debt that can be converted into stock) to continue growing.
Coupa announced a number of brand-new customers who signed onto its platform during Q1, and it expects more to do so as the year progresses.
Although high demand due to organizations adapting to work-from-home and shelter-in-place orders is now more than priced into the share price, Coupa Software is facing some headwinds along with its customers due to the current state of the global economy. And in spite of those headwinds, the company is still growing mighty fast. It is priced for an uptick in the near future, therefore this could be a highly profitable cloud software stock down the road.
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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!