Coupa's Premium Valuation Doesn't Deter Bull Analysts After Beat-and-Raise Q1

Coupa Software Inc COUP, a provider of cloud-based business spending management software, reported Monday after the close with strong first-quarter results that sent the stock higher.

The Analysts

Bank of America Merrill Lynch analyst Brad Sill reiterated a Buy rating on Coupa and increased the price target from $120 to $125.

Raymond James analyst Brian Peterson reiterated an Outperform rating and lifted the price target from $107 to $115. 

KeyBanc Capital Markets analyst Brent Bracelin maintained an Overweight rating and hiked the price target from $123 to $127.

BofA: Power Apps, Larger Deals Drive Upside

Coupa reported better-than-expected first-quarter revenue, with the growth in subscription revenue bettering expectations, Sill said in a Monday note.

Billings grew 50 percent year-over-year to $75.1 million against BofA's estimate of $62.4 million, with the analyst attributing the billings strength to both the upselling of power apps and larger initial deal sizes.

Notwithstanding the fewer number of customers added in the quarter, cumulative spend under management grew 60 percent, reflecting the signing of larger customers, the analyst said. 

The EPS upside came about from higher operating margin, revenue upside and scale across R&D and G&A, Sill said. 

Coupa also raised its 2020 revenue, operating income and EPS guidance.

"We are encouraged by early traction of the value added payments offerings amongst early adopter customers, which is a positive indicator for a business that has potential to expand Coupa's addressable market significantly," Sill said. 

See also: Coupa Software Analysts Bullish After Q4 Print; Raymond James Sees Large-Cap Potential

Raymond James: Shares Will Continue To Compound 

Coupa's revenue per customer levels should grow materially higher, given its compelling ROI propositions, expanding product offering, strategic partner ecosystem and longer-term payments monetization, Peterson said in a Tuesday note. 

" ... Fundamental drivers appear to be accelerating, with a number of early product opportunities (particularly analytics and payments) suggesting that this may be a longer-term dynamic," the analyst said. 

Provided the company can continue to deliver significant top-line upside, Peterson said he sees little to move the premium valuation placed on the shares.

Raymond James projects the stock will continue to compound for the foreseeable future.

KeyBanc: $1B Revenue In Sight 

The uncharacteristically strong start to the year for Coupa suggests that demand for modern business spend management software is robust, Bracelin said in a Monday note. 

"New products in 2019 that monetize an underappreciated data asset (trillion-dollar spend data) and new B2B payment offerings could become game changers for COUP and help accelerate the path to $1B in revenue," the analyst said.

KeyBanc maintained its bullish stance on the basis of "new product potential, international expansion, Federal, and a unique data asset that is in the early stages of monetization."

The Price Action

Coupa shares were trading up by 6.05 percent to $108.68 at the time of publication Tuesday. 

Related Link: Sell-Side Largely Bullish On Coupa Software After Q3 Beat-And-Raise