Coupa Analysts Unanimously Think Shares Are Fairly Valued Following Post-Earnings Sell-off; 'Improvement Will Take Time'

Coupa Software Inc COUP shares are tumbling on Tuesday after the business spend management software provider issued a below-consensus revenue forecast.

The Coupa Analysts: Wells Fargo Securities analyst Michael Turrin maintained an Equal Weight rating on Coupa shares and reduced the price target from $190 to $80.

RBC Capital Markets analyst Rishi Jaluria maintained a Sector Perform rating and slashed the price target from $155 to $65.

Needham analyst Scott Berg maintained a Buy rating and lowered the price target from $210 to $90.

KeyBanc Capital Markets analyst Josh Beck maintained an Overweight rating and took down the price target from $175 to $125.

JMP Securities analyst Patrick Walravens maintained a Market Perform rating.

The Coupa Theses:

Wells Fargo Says Improvement Will Take Time: Coupa's 2023 guidance for subscription revenue and total revenue growth, as well as adjusted operating margin came in below expectations, Wells Fargo analyst Turrin said. Commentary on investment toward reacceleration of growth in 2024 suggests a potential rebound has likely extended further into the future, the analyst said.

"We continue to expect any improvement will take time and that COUP shares will remain volatile until more consistent signs of recovery take shape," Turrin said.

RBC Says Shares Are Now Fairly Valued: RBC is incrementally negative on Coupa in the near term, given the prospects of decelerating growth, contracting margins, and a long and uncertain path back to 30%+ growth, RBC analyst Jaluria said.

The shares are now fairly valued, the analyst added.

RBC said it continues to believe Coupa will remain the technological BSM leader, with the opportunity to displace SAP SE SAP over time.

Needham Sees Potential For Upside To Guidance: Coup's revenue outlook calls for 20% subscription revenue growth offset by declines in PS as Coupa migrates the Llamasoft base while pushing implementations to partners, Needham analyst Berg noted.

This coupled with an initial margin outlook that calls for increased investment to accelerate growth in 2024 spooked investors, the analyst indicated.

Coupa, however, reiterated its commitment to mid-20s organic billings growth in the near-term, Berg said. There is potential for upside to this initial outlook for the top- and bottom-line, he added.

KeyBanc Recommends Buying The Dip: Coupa spoke of its largest pipeline ever and also noted strong new business activity, KeyBanc analyst Beck said. At the same time, the company said it would take several years for the outsized new business growth to return to pre-COVID levels, he added.

The weak guidance, the analyst said, reflects a typical conservative Coupa posture and a multiyear rebuild on a business particularly skewed toward new enterprise bookings.

With the post-earnings pullback, valuation has become attractive for the leading spend management franchise with untapped payments and early-stage mid-market opportunities, KeyBanc said. The firm, therefore, recommended buying the shares on the pullback.

JMP Lowers Estimates: While Coupa investors are disappointed with the 2023 growth outlook, coupled with greater investments and contracting margins, the company is confident the investments will pay off, JMP analyst Walravens said.

The analyst lowered his non-GAAP earnings per share estimates for fiscal years 2023 and 2024.

"We believe Coupa is fairly valued as at the close price, Coupa trades at a CY23E EV/revenue multiple of 7.7x, versus the peer group median multiple of 6.6x," the analyst said.

Coupa Price Action: At last check, Coupa shares were sliding 20.62% to $71.02.

Photo: Courtesy of coupa.com

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