Coupa Software ‘Disproportionately Recession-Prone’ – RBC
2022.08.22 20:18
Coupa Software (COUP) ‘Disproportionately Recession-Prone’ – RBC
By Sam Boughedda
Coupa Software (NASDAQ:COUP) shares were downgraded to Underperform from Sector Perform with the price target cut to $55 from $65 by an RBC Capital Markets analyst on Monday.
The analyst said the firm is downgrading the stock due to four main reasons, including their view that Coupa is “disproportionately recession-prone,” concerns on the roll-up nature, the financial profile looking unattractive, and the company having had “limited success expanding outside core B2B procurement.”
“We see a challenging macro environment ahead for Coupa, which we expect to manifest in decelerating growth. We often hear the argument a recession could prove positive for Coupa since its software is intended to generate cost savings, but we note this widely-circulated thesis didn’t pan out during COVID. In addition, we believe companies have a lower appetite for replacing SAP Ariba with Coupa during times of uncertainty, as we believe a recession will only intensify incumbency bias,” said the analyst.
Coupa Software shares are down 7.5% Monday, adding to the decline over the last 12 months, which stands at over 60%.
“Although we view Coupa’s cloud-native B2B procurement software as best-in-class, most of the other modules are acquired and, often, lacking competitively,” added the analyst. “Stepping back, we still like the tech and see upside risk from M&A; PE seems more likely than strategic, but either is possible with $5.7B EV and PE take-outs of back-office software names (PLAN, AVLR), but we see too many downside risks near-term to be constructive.”
