Goldman Cites Lack Of Competition In Bullish Coupa Software Initiation

Coupa Software Inc COUP has established itself as a sector leader and should show superior growth rates over the next three to five years, according to Goldman Sachs.

The Analyst

Goldman Sachs' Jesse Hulsing initiated coverage of Coupa Software's with a Buy rating and $60 price target.

The Thesis

Coupa Software boasts more than 700 customers, but its performance in 2017 shows it has plenty of growth ahead, Hulsing said in the initiation note. (See the analyst's track record here.) 

Coupa's total contract value bookings growth accelerated from 21 percent in 2016 to 47 percent, while customer growth accelerated from 29 percent to 34 percent over the same time period. The San Mateo, California-based company hit a "tipping point" with its supplier network, data, systems integrator ecosystem, reference customers and feature and functionality, the analyst said. 

Coupa's "tipping point" should be sustainable for the next three to five years for three reasons, the analyst said:

• The company continues to broaden its addressable market.
• Spend management is considered a standalone category.
• Coupa Software can grow its share of the wallet with existing customers as newer modules mature.

The company is operating without any formidable "next generation" SaaS competitor, Hulsing said. Even among mega-cap competitors, Coupa Software holds competitive advantages in terms of user experience, its underlying technology and analytics capabilities, the analyst said. 

"As COUP's supplier network, systems integrator ecosystem and product capabilities continue to expand, we believe it will be challenging for new competition to emerge from legacy vendors or from venture-backed startups." 

Price Action

Coupa Software stock was rallying 5.7 percent to $49.33 at the time of publication Monday. 

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