Shares of Coupa Software (COUP), a provider of a cloud-based corporate spend management software, have declined more than 15% over the past week, including 25% declines in thirty days as investors continue to reevaluate potential returns in high-growth software stocks.
The company has been dragged down by the recent punishment in tech stocks on fears of rising interest rates. Coupa, meanwhile, has been severely punished as the the stock has lost 50% of its value year to date, compared to the 22% rise in the S&P 500 index. But is now a good time to bet on a recovery? The company is set to report third quarter fiscal 2021 earnings results after Monday’s closing bell. Aiming to become a Business Spend Management (BSM) leader, Coupa makes money by analyzing large quantities of corporate transactional expense data, looking for spending patterns and areas of inefficiency.
Boasting 100,000-plus potential global customers, Coupa counts companies as large as Walmart (WMT), Salesforce (CRM), Procter & Gamble (PG), among others, as clients. With its total addressable market measured at $56 billion and growing, Coupa’s platform helps customers with actionable insights that can lead to improved inventory management, smarter purchasing decisions, while lowering expenditures. But concerns about slower growth has kept new investors at arm’s length. The company on Monday can change that narrative by delivering a top- and bottom line beat, along with confident guidance.
In the three months that ended October, the San Mateo, CA-based company is expected to earn 2 cents per share on revenue of $178.34 million. This compares to the year-ago quarter when it earned 18 cents per share on revenue of $132.96 million. For the full year, ending January, earnings are expected to be 32 cents per share, down from earnings of 77 cents per share a year ago, while full-year revenue of the $708.67 million would rise 30.8% year over year.
Coupa's BSM platform, which includes a comprehensive suite of procurement solutions that helps businesses assess expenditures from things such as sourcing, invoicing as well as travel/expense management, enables customers to realize stronger and more targeted working capital by de-segmenting organizational silos to better assess risks across the organization. The company has also begun to integrate its platform into various components of its clients such as supply chains finance operations, making itself a more sticky product to discontinue.
The management has discussed the company’s ability to expand, given the projected increase in digital transformation spending which analyst forecast will outpace overall IT budgets in 2022. To date, Coupa has shown it can execute on its stated objectives, beating Wall Street’s revenue and profit estimates in the past ten quarters. In the second quarter, it delivered growth within each business segment, highlighted by Q2 revenue surging 42% year over year to $179.25 million, easily topping estimates by $16 million.
Subscription revenue rose 40% year over year, and accounted for 87% of total revenue. Coupa reported a surprised adjusted EPS of 26 cents, better than estimates for a loss of 6 cents per share. Just as impressively, Q2 calculated billings — indicator of future revenue growth — surged 49% to $195 million. Assuming a top and bottom line beat, along with confident guidance on Monday, Coupa stock — which has fallen to 52-week lows — could be one of the better bargains on the market among software stocks.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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