Coupa Software ( NASDAQ: COUP ) shares fell on Thursday as investment firm Piper Sandler downgraded the software company, noting it has increased financial risks, as well as "the emergence of a new class of competition."
Analyst Brent Bracelin lowered his rating on Coupa Software ( COUP ) to underweight from neutral, while cutting the firm's price target to $55 from $67. Bracelin noted foreign exchange headwinds, risk from payment timing, elongated sales cycles and risks from refinancing its convertible debt led to the downgrade, in addition to new competition.
"While absolute downside risk in Coupa is limited given M&A prospects, the risk-reward appears more favorable for HUBS or WDAY at comparable valuations." Bracelin wrote in a note to clients.
Coupa Software ( COUP ) shares sank 2.6% to $52 in premarket trading.
Delving deeper, Bracelin noted that Coupa ( COUP ) has a "large portion" of its enterprise and mid-market customers on annual pre-pay contracts, with deferred revenue accounting for 77% of its operating cash flows and 82% of subscription estimates.
"Any payment timing changes across customer renewals looking to conserve cash and pay on quarterly or semi-annual terms could pressure quarterly FCF metrics," Bracelin wrote, while adding that the aforementioned other financial risks could "create an even bigger short-term drag on billings growth."
The analyst also noted that new competitors are emerging to Coupa ( COUP ) for the first time in years, including privately held San Francisco-based Zip.
Last week, investment firm RBC said that Coupa Software ( COUP ) could be an attractive takeover candidate from private equity .
Analysts are universally cautious on Coupa Software ( COUP ). It has a HOLD rating from Seeking Alpha authors , while Wall Street analysts rate it a BUY . In addition, Seeking Alpha's quant system, which consistently beats the market, rates COUP a HOLD .
For further details see:
Coupa Software sinks as Piper Sandler downgrades, citing new competition, financial risks