Posted on October 26th, 2020
Coupa Software Inc. (COUP) has seen impressive growth in recent months after a short dip in February and March, coinciding with the start of the coronavirus pandemic. Coupa has to-date outperformed the S&P 500 with ease, rising approximately 106.5%. In comparison, the S&P 500 has risen by only about 7.3% as of October 23. The company landed with a ranking of seven on the WhaleWisdom HeatMap, up from 31.
The global technology platform for business spend management designs and develops software solutions. Coupa provides businesses with the opportunity to conduct all their spending activities in one place through Coupa’s could-based suite of business spend management (BSM) applications. The company has shown flexibility in meeting customers’ needs. Its cloud-based suite of applications has served useful to companies transitioning to remote work during the pandemic.
Mixed Results from Hedge Funds and Institutions
Institutions have been buying, with aggregate 13F shares held increasing by approximately 2.4% to about 71.7 million from about 70 million. Looking at second-quarter activity by the top hedge funds, circumstances were slightly different. The aggregate 13F shares held decreased to approximately 21 million from about 25.3 million, a slide of roughly 17.1%. Of the hedge funds, 26 created new positions, 29 added to existing holdings, 33 exited, and 41 reduced their stake.
Analysts estimate that earnings will rise to $1.07 per share in 2023, up from just $0.45 for 2021. Earnings will see an initial decline of approximately 14.2% in 2021. Still, in the long-term, upward momentum will continue bringing 79.1% year-over-year growth by January 2023. Revenue is predicted to reach approximately $1 billion in 2024, nearly double the $498.6 million estimate for 2021.
Analysts Are Optimistic Despite Valuation Headwinds
Oppenheimer & Co., Inc. raised its price target on Coupa to $285 from $265, citing Coupa’s success at penetrating the spend management market. Oppenheimer’s analyst, Koji Ikeda, is optimistic about the stock long-term. RBC Capital Market’s analyst, Alex Zukin, gives Coupa an outperform rating, increasing the price target to $300 from $245 and citing pipeline improvements and growth potential. Deutsche Bank starts Coupa with a Buy rating and an encouraging $345 price target, acknowledging its leadership in a sizeable market and the potential for market share gains.
Coupa’s Growth Brings Confident Estimates Beyond 2020
As Coupa faced some challenges amidst the pandemic, it is understandable why some hedge funds have sold. However, the company gained some impressive upward traction over the summer months and continues to see growth. Coupa’s impressive growth and future multi-year estimates are encouraging for investors.