Analyst Note| Julie Bhusal Sharma |
On July 15 narrow-moat Coupa hosted its investor day which highlighted progression toward a comprehensive, synergistic solution that leverages AI technology and focuses on maximum value creation for customers. Core to this concept is the progression of Coupa Pay, Coupa Community.AI, and business spend management, or BSM, marketplace--all in addition to the transactional core behind Coupa’s solutions. Despite the overwhelmingly positive strategic initiatives and addressable market expansion, management stayed distant from setting financial targets with matching optimism. Apart from a slightly raised FCF outlook, all midterm margin targets stayed flat from 2019 midterm targets, when we’d hoped for at least marginal improvement given the two years’ time since the last midterm guide and the fact that Coupa is steadily realizing economies of scale and benefiting from leverage. Even more important was the fact that Coupa’s long-term non-GAAP operating margin guide between 25% and 30% came under our previous terminal non-GAAP operating margin estimate of 32%. As we consider the abundant growth opportunities ahead for Coupa’s increasingly comprehensive BSM solution moderated by weaker operating leverage than we had previously forecast, we are lowering our fair value estimate to $225 from $252. With the stock trading around $226 at close, we view shares as fairly valued.