Coupa Software Stock Retreats On Q1 Results: Why Analysts Are Long-Term Bullish

Coupa Software Incorporated COUP shares traded sharply lower Tuesday despite the company reporting better-than-expected first-quarter results.

Here's what the Street had to say. 

The Coupa Analysts: Morgan Stanley analyst Stan Zlotsky maintained an Overweight rating on Coupa Software and lowered the price target from $395 to $381.

Raymond James analyst Brian Peterson reiterated an Outperform rating and reduced the price target from $365 to $300.

KeyBanc Capital Markets analyst Josh Beck reiterated an Overweight rating and took the price target lower from $400 to $350.

Needham analyst Ryan MacDonald reiterated a Buy rating and lowered the price target from $385 to $280.

Piper Sandler analyst Brent Braclein maintained an Overweight rating and trimmed the price target from $315 to $300. 

Why Morgan Stanley Sees 'Plenty of Upside':  Coupa's first-quarter highlighted a "weak renewal base," as the pandemic that began a year ago drastically reduced new bookings in the period, Zlotsky said in a note.

This dynamic will likely repeat in the second quarter, the analyst said. 

Organic billings grew 24% in the first quarter, paling before the 46% total billings growth, he said. 

The 95% growth in remaining performance obligation bookings in the first quarter is a much more telling metric of the acceleration in growth that the company is seeing coming out of the pandemic, Zlotsky said.

"Although we trim our gross margins beyond FY22to account for potentially lower Llamasoft margin structure, we still see plenty of upside to the stock."

Related Link: 5 Reasons For Piper Sandler's Upgrade Of Coupa Software

RayJay On Impact Of M&A Deal: Moving parts related to recent M&A is driving a guidance that is below buy-side expectations, Peterson said in a note. 

"While the LLamasoft acquisition clearly marks a key strategic investment for Coupa, it does create an additional layer of complexity given the revenue associated with transitioning these customers to the cloud," the analyst said. 

This dynamic should ultimately be short-lived, given encouraging dynamics around core bookings and new key products like Pay, he said. 

"We suspect that this narrative will come into focus at the company's upcoming investor day in July, where the narrative may shift away from quarterly variability and more on strategic dynamics." 

KeyBanc Says Coupa's New Business Improving: Coupa's first-quarter beat came on the back of 39% trailing 12 months billings growth, Beck said in a note.

The company's guidance reflected a continued degree of conservatism, as enterprise Backoffice DT project activity remains subdued, the analyst said. 

A doubling of new business, however, suggests an improving environment and mid-market activity, he said. 

KeyBanc attributed its price target reduction to the broader SaaS retraction, and its bullish stance to Backoffice improvement, Coupa Pay and footprint expansion.

Needham Says Buy The Dip In Coupa: The recently acquired LLamasoft's strong contribution to billings in the quarter may have triggered weakness in the stock, MacDonald said in a note. 

The sequential acceleration in calculated organic billings is a positive sign for the business during the general recovery, the analyst said. 

Coupa will need a mix of organic and inorganic growth to maintain its 30% pace, he said, adding that Needham still views the current set-up as attractive.

"We believe any weakness represents a buying opportunity given Coupa's strong position and broadening platform that creates a strong expansion opportunity."

COUP Price Action: Coupa Software stock dropped 8.17% Tuesday, closing at $217.40. 

Related Link: Coupa Introduces $50M Ventures Fund to Assist Startups