Please ensure Javascript is enabled for purposes of website accessibility

Why Coupa Software Is Sinking Today

By Brian Feroldi - Dec 4, 2018 at 3:07PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares plunged even though the company reported upbeat earnings. What can explain the decline?

What happened

In response to reporting of fiscal third-quarter results, shares of Coupa Software (COUP -6.57%), a software-as-a-service company that focuses on procurement, invoicing, and expense-management solutions, fell 10% as of 2:45 p.m. EST on Tuesday.

So what

Here are the highlights from the third quarter: 

  • Revenue grew 42% to $67.5 million. That number sailed past the $62.6 million that Wall Street was expecting.
  • GAAP net loss was $9.6 million, or $0.17 per share.
  • Non-GAAP net income nearly doubled to $5.5 million, or $0.08. Market watchers were expecting a loss of $0.03 per share, so this was also a significant beat. 
Three people looking at a computer screen and acting concerned.

Image source: Getty Images.

Guidance looked favorable, too:

  • Revenue in the upcoming quarter is expected to land between $67.8 million and $68.3 million. That's ahead of the $64.1 million that Wall Street expected.
  • Non-GAAP net income per share in the next quarter is expected to be break-even. That's also better than the current estimate of a $0.09-per-share loss.
  • Full year fiscal 2019 revenue is expected to be between $253 million and $253.5 million. Non-GAAP net income per share is expected to be between $0.11 and $0.13 per share. Both of these figures are ahead of the current estimates. 

Given the strong results and bullish guidance, the most likely reason for Coupa's decline today is that the stock's valuation was simply too high. Shares traded for about 18 times trailing sales prior to today's fall, which is quite rich.

What's more, the overall stock market is falling hard today, so Coupa probably just picked a tough day to report earnings. 

Now what

Coupa's strong growth rates clearly indicate that the company is having a lot of success with signing up new customers. What's more, the company should be on the cusp of reaching GAAP profitability soon, which is another huge positive for investors.

Overall, I see nothing in this earnings report to suggest that this stock is in trouble. If you were a bullish on Coupa's stock yesterday, I see no reason to change your tune today.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Coupa Software Incorporated Stock Quote
Coupa Software Incorporated
COUP
$64.58 (-6.57%) $-4.54

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
349%
 
S&P 500 Returns
122%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.