Coupa Software Plunges Over 30% on Bleak FY2023 Outlook

Coupa Software (NASDAQ: COUP) shares lost almost a third of its market capitalization during the after-hours trading session on March 14, after the global technology platform for Business Spend Management meted out the FY2023 outlook that significantly lagged analysts’ expectations.

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Investors were were failed to be consoled by the fourth-quarter results, which topped both earnings and revenues estimates.

Q4 Beat

Q4 adjusted earnings of $0.19 per share significantly beat analysts’ expectations of $0.05 per share. The company reported earnings of $0.17 per share for the prior-year period.

Further, revenues jumped 18% year-over-year to $193.3 million and also exceeded consensus estimates of $185.68 million. The increase in revenues reflects a surge in Subscription revenues, which increased 28% to $173 million.

Driven by growth of over 60% in new business generated from new customer logos and add-on transactions, total revenues grew 34% year-over-year to $725.3 million, for FY2022.

Bleak FY2023 Outlook

Looking ahead, management provided financial guidance for FY2023 much lower than the Street’s expectations.

For the full year, the company now forecasts adjusted earnings in the range of $0.15 to $0.19 per share, much lower than the consensus estimate that is pegged at $0.74 per share. Revenues are forecast to be in the range of $836 million to $840 million, significantly lower than the consensus estimate of $877.5 million.

For the first quarter, adjusted earnings are likely to range between $0.03 and $0.06 per share, while the consensus estimate is pegged at $0.05 per share. Revenues are projected to be in the range of $189 million and $191 million, versus the consensus estimate of $196.1 million.

CEO Comments

Looking ahead, Coupa CEO Rob Bernshteyn, commented, “As the clear leader in Business Spend Management, we’re tightly aligned with our community to bring back-office digital transformation to the forefront, a journey that’s only just beginning for many companies.”

Wall Street’s Take

Following the muted FY2023 outlook, Oppenheimer analyst Koji Ikeda downgraded Coupa Software to Hold from Buy and also removed its prior price target of $200.

Ikeda’s downgrade is based on his belief that Coupa’s business has several moving parts. The analyst highlighted that the company’s higher exposure to Europe versus its SaaS peers could lead to significant organic growth deceleration and margin contraction as seen in the lower-than-expected FY2023 guidance.

The analyst concluded, “We caution investors on getting involved in bottom fishing COUP shares in the hopes for outsized returns because the bull case or return to 30% growth anytime soon now looks off the table, we see risk to management’s medium-term mid-twenty’s organic growth guidance, and few near-term catalysts.”

Turning to Wall Street, the analyst consensus is, however, cautiously optimistic about the stock, with a Moderate Buy consensus rating based on 3 Buys and 6 Holds. The average Coupa Software price target of $161 indicates an upside potential of 79.25%, at the time of writing.

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