Coupa's Q3 Beat Came In Line With Most Analysts' Expectations Amid Europe's Uncertain Demand Environment, Further Fueled By Takeover Story

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  • Needham analyst Scott Berg reiterated Buy on Coupa Software Inc COUP before the company declared its Q3 results.
  • Coupa reported third-quarter revenue of $217.3 million, which beat average analyst estimates of $213.33 million. The company reported third-quarter EPS of $0.15, which beat estimates of $0.10.
  • Also Read: Coupa Software Stock Is Soaring Today: What's Going On?
  • Berg expected a 3Q23 beat as the analyst's industry work indicated deals were still getting done in the U.S., while the European environment was relatively uncertain. 
  • The analyst agreed with the HMI activist letter highlighting that a purchase price closer to $90-$95 a share would be required to close a deal. 
  • The TAM for Coupa is sizable, with 100K prospective customers versus their roughly 2,500 today, along with the opportunity to cross-sell its roughly dozen modules.
  • Berg expected the latest cycle of sales investments put in place over the last six months to impact booking trends in early FY24. 
  • KeyBanc analyst Josh Beck reiterated Overweight with a $70 price target ahead of the quarterly results.
  • For the demand environment, Coupa was arguably early to identify softness in enterprise spending primarily from the European region. 
  • Beck's channel conversations suggested ongoing softness in Europe and enterprise, with some more relative resilience in the mid-market and LT demand environment. 
  • Street estimates for subscription billings in the 2H in the mid-teens appear reasonable, with some potential risk from FX and softening North American demand. 
  • From a profitability point of view, Coupa has achieved LDD operating margins in the past. Any further emphasis and clarity on a return to these levels could be a potential positive. 
  • The analyst believes public markets currently under-valued Coupa's intrinsic value as a combination of the pandemic and macro uncertainty has generally stalled sales cycles. 
  • Citi analyst Steven Enders perceived a low bar for the Q3 results on a fundamentals basis as COUP was early to call out macro concerns in European enterprises. The pre-acquisition unaffected price was down -71% YTD vs. IShares Expanded Tech-Software Sector ETF IGV down -34%. 
  • The analyst's learnings from 3Q22 results suggest favorable results for names with depressed expectations as Enders perceive a conservative guide. 
  • However, the analyst noted COUP shares are up +39% QTD (vs. -1% for IGV) on reports of a potential PE takeout, creating a clouded sentiment picture. 
  • Based on new LBO analysis and prior transactions adjusted for the changing rate environment, the analyst saw a $66-81 range as a realistic takeout level.
  • Price Action: COUP shares traded higher by 26.8% at $78.71 on the last check Monday.
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