This year, the era of cloud technology dominance has officially begun. With cloud stocks leading the Nasdaq to record highs regularly, many investors are trying to figure out just how much potential these companies will have over the next decade. It’s easy to understand why businesses that are involved in cloud technology are seeing so much positive momentum in the market. The sector is less exposed to negative factors from the pandemic and cloud computing data centers are increasingly playing a massive role in the global economy.
While you are probably already familiar with the usual suspects in the cloud computing space including Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), and Salesforce (NYSE:CRM), there’s one cloud company that has been quietly reaching all-time highs and looks like a strong force in the sector going forward. Coupa Software (NASDAQ:COUP) provides Business Spend Management solutions via its cloud-based platform. The stock is up over 130% year to date and might be a household name sooner than you think. Let’s take a look at Coupa Software below and determine whether or not it’s worth a look for your portfolio.
Helping Companies Manage Spending
With the global pandemic impacting the budgets of most companies in some way, it makes sense that Coupa Software’s platform has been a hot-seller. Its cloud-based Business Spend Management (BSM) platform helps businesses with controlling their spending and improving their profitability. The software is designed to provide advanced analytics and AI-powered benchmarking to help companies track their expenditures and learn from every dollar spent. Small and medium-sized businesses can use Coupa for better visibility and control with certain business processes while large enterprises can save millions thanks to advanced cost-tracking capabilities.
The reason Coupa is such an intriguing platform is that it allows companies to take care of all of their business spend activities in one place. Companies can handle procurement, invoicing, expense management, and payments all with Coupa’s solutions. Since many companies have separate software for each one of these tasks, the idea of having it all in one place with an intuitive and user-friendly platform makes a lot of sense. More people are working from home than ever before, which is perfect for Coupa’s customers since its software can be accessed from anywhere as long as you have access to the internet. It’s easy to understand why Coupa Software has so much potential, especially if the current economic difficulties persist.
Growing Fast
This growth stock has been roaring higher since hitting its March lows, and a lot of it has to do with its rapidly increasing customer base and strong revenue numbers. In FY 2020, Coupa reported record annual revenue that amounted to 50% year-over-year growth. Sales are also growing annually for the company at 47%. Coupa Software has already added some well-known companies to its customer base including Transunion, Proctor & Gamble, Shopify (NYSE:SHOP), Nvidia (NASDAQ:NVDA), and Salesforce. The truth is that Coupa has a lot more room for growth and the company estimates that the Total Available Market for its software comes in at $56 billion.
It looks like FY 2021, which began in February, is already off to a historic start for the company. Coupa saw record quarterly revenues of $119 million in Q1, which was an increase in 47% year-over-year. Q1 also saw Coupa bring in record quarterly subscription revenues of $105 million, a year-over-year increase of 45%. Since its platform is offered as a subscription, it means that Coupa’s loyal customers will continue providing the company with recurring revenue. That’s great news for growth investors since it means that the company’s existing revenue streams are easier to predict.
What to Watch for in the Q2 Earnings Report
This is a stock to watch this week, as the company will report its Q2 earnings on September 8th after the market close. Coupa Software has a nice history of beating consensus estimates on earnings releases and has a chance to do so again next week. However, if you are interested in adding shares of this company, it might be best to wait until after the report is released. That’s because analysts are expecting a strong quarter for the company and anything short of extraordinary results could lead to a short-term downturn for the share price.
There’s a chance that the pandemic might have reduced the spending in small and medium-sized businesses which could have potentially capped growth for the company in Q2. You should also look at operating expenses since Coupa is spending money on product development to keep competitors like SAP at bay. The consensus estimates for Coupa Software’s Q2 EPS is $0.8 per share, which would be 14.3% year-over-year growth. Regardless of whether or not the company beats Q2 estimates, it is certainly an intriguing investment prospect that could be a strong winner in the cloud software space over the long-term.