Coupa Software ( NASDAQ: COUP ) shares slipped on Monday after investment firm RBC downgraded the business spend software company on worries the company is "disproportionately recession-prone."
Analyst Rishi Jaluaria lowered his rating on Coupa Software ( COUP ) shares to underperform from sector perform and cut his price target to $55 from $65, noting that in addition to worries about a recession, the company's financial profile is "unattractive" and has limited success expanding outside of its core market.
"We often hear the argument a recession could prove positive for Coupa since its softwareis intended to generate cost savings, but we note this widely-circulated thesis didn't pan out during COVID," Jaluria wrote in a note to clients, adding that customers had a "lower appetite" to replace SAP ( SAP ) Ariba software with Coupa ( COUP ) during the early days of the pandemic.
Coupa Software ( COUP ) shares fell nearly 4% to $65.08 in premarket trading.
In addition, the company's nature as a roll-up company -- in which it has bought 15 companies in five years -- has made it difficult to integrate some acquisitions, notably its Llamasoft acquisition.
Jaluria also noted that Coupa Software's ( COUP ) margins have contracted and growth has decelerated and it's hard to get "sustainable" 25% or more organic revenue growth, along with an overstated margin profile due to high stock-based compensation.
In July, Coupa Software ( COUP ) said that it had opened three new offices this month in Latin America – Mexico City, Mexico, São Paulo, Brazil and Bogotá, Columbia .
Analysts are overwhelmingly cautious on Coupa Software ( COUP ). It had an average rating of BUY from Seeking Alpha authors , while Wall Street analysts rate it a BUY . Seeking Alpha's quant system, which consistently beats the market, rates COUP a HOLD .
For further details see:
Coupa Software slips on RBC downgrade, says it's 'disproportionately recession-prone'