Coupa Software Offers Growth Momentum And Healthy Results, But At A Pricey Valuation

Shares of Coupa Software Inc (NASDAQ: COUP) were trading higher by more than 3 percent early Tuesday morning in reaction to the company's better-than-expected first-quarter earnings report. However, not all among the Street found the report encouraging enough to take a bullish stance.

Barclays' Raimo Lenschow maintains an Equal-Weight rating on Coupa's stock with a price target boosted from $28 to $32, which implies downside from current levels.

Expensive Stocks Despite A Good Quarter

Coupa's earnings report contained several positive metrics, including a 13-percent beat to billings, which is seeing strong momentum and high-profile wins with Scotia Bank, Pearson, and an unnamed Fortune 500 financial services firm.

Other encouraging aspects of the report include a positive operating cash flow of $7.2 million, new strategic partnerships with Amazon Business, the addition of artificial intelligence capabilities from the acquisition of Spend360 and new product launches like Service Maestro.

However, the stock remains expensive on a valuation basis versus its peers.

Coupa's stock is trading at 9.5x EV/CY18E, which is a premium to Workday Inc (NYSE: WDAY) and ServiceNow Inc (NYSE: NOW) — both of which trade at a 8.2x multiple, the analyst explained. Meanwhile, Coupa operates at a less scale compared to its peers, which calls into question how much more room the stock has to move higher.

As such, the analyst's price target is based on a multiple of 8.0x, which is roughly in line with its peers.

At last check, shares of Coupa were down 4.89 percent at $34.60.

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