Coupa Software (COUP - Free Report) is a Zacks Rank #3 (Hold) but there is a good chance that the Zacks Rank for this stock jumps to a Zacks Rank #2 (Buy) or even a Zacks Rank #1 (Strong Buy) in the next few days. The company just posted a very solid quarter and analysts will be revising estimates higher and that tends to improve the Zacks Rank for any stock.
COUP isn't that big of a stock compared to others in the enterprise software space. At $1.6B the company is only a fraction of WDAY, CRM, SAP and ORCL. The company's software helps businesses manage their purchasing. As their tag line says, what CRM is to sales, COUP is to expenses.
The company reported a loss of $0.10 per share, but that was $0.09 better than expected. Revenue rose 43% from the year ago level to $44.6M when $41.6 was expected. The key idea here is that the fiscal first quarter that was reported back in June of this year showed growth of 40.8% on the topline, so the 43% rate is an acceleration of growth. Growth investors love to see this and they are generally willing to pay a little more for growth than value investors are for any sort of value play.
The company guided next quarter inline, as they gave a range of a loss of $0.12 - $0.10 when a loss of $0.12 was expected. However, the company guided revenue for next quarter above consensus with an expected range of $44.8M-$45.3M when the consensus was calling for $44.08M.
For FY18, the company sees a loss between $0.48 to $0.50 when the consensus was looking for a loss of $0.51. The company expects revenues of between $177M - $179M when the consensus was calling for $174M.
This is what we call a beat and raise report and aggressive growth investors love to see this.
I see three recent research reports on the stock with two of them being initiations. First Analysis out of Chicago started the stock with an Overweight rating and price target of $37 in early August. BTIG Research started the stock at a Buy in early June and put a $40 price target on the stock. On June 1, RBC Capital Markets reiterated their Outperform rating on June1 and at that time they raised their price target to $40 from $35.
Following this most recent beat and raise the stock is still a ways away from even the lowest price targets. The probability of a higher price target isn't all that good (at least at the time this piece was written).
This was a solid quarter and down the road, COUP will be bought by one of the bigger players. Long term investors will be rewarded if they hold this stock and ride out any rough patches. For the more immediate traders, this stock is primed for a move higher as options were pricing in a move of 11.6% and the stock was up around 8% in after hours. The thing is, the shorts were probably looking to hammer this stock as good reports from CRM and WDAY failed to move those stocks. Given those ideas, don't be surprised if COUP runs up more than 15% today.
Following this report, the stock deserves to be on your radar screen.
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