4 Reasons Needham Is Bullish On Coupa Software

Need a reason to buy shares of Coupa Software Inc COUP?

The Analyst

Needham's Peter Levine initiated coverage of Coupa's stock with a Buy rating and $39 price target.

The Thesis

Investors should consider Coupa as not only one of the "more innovative vendors" within the spend management software market but as one of the few pure-play multi-tenant SaaS vendors, Levine said in a note. The company is well positioned to take advantage of businesses managing spend as it has become a "strategic business initiative" and companies need modern commerce applications like Coupa to "better incentivize employees."

The analyst further offered four reasons to support a bullish stance, including:

1. A secular transition towards Coupa's SaaS based applications is "ripe" as the market is currently dominated by non-user friendly applications;
2. Coupa could address a market that is growing at a 9 percent compounded annual growth rate and total $10 billion in 2020;
3. M&A activity in the sector will likely result in a "perpetual bleed of customers" looking for a best of breed technology which Coupa offers; and
4. The Street's top-line growth estimate of 24.8 percent in fiscal 2019 and 23.0 percent in fiscal 2020 are "relatively conservative" and the analyst is calling for a growth of 27.9 percent in fiscal 2019 and 25.4 percent the following year.

Price Action

Shares of Coupa Software were trading higher by more than 5 percent at $33.64.

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