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Many software stocks and Cathie Wood favorites peaked in early 2021. The ARK Innovation Fund (ARKK) is down more than 65% from the start of last year while the iShares Expanded Tech-Software Sector ETF (IGV) is down ‘just’ 22% in that time. One small-cap software name looks more like an ARKK stock with its price action recently. A key earnings report could help decide the battle between its bulls and bears this summer.
ARKK, IGV, COUP: Bears Reign Supreme In High-Growth Tech/Software
Stockcharts.com
According to Bank of America Global Research, Coupa Software (NASDAQ:COUP) is a cloud-based platform provider of comprehensive Business Spend Management software. Coupa offers solutions for the entire Business Spend Management cycle, including Procurement, Payment, Expensing, and Invoicing, as well as supply chain management and analytics.
The California-based $4.3 billion market cap Software industry stock in the Information Technology sector has negative GAAP earnings over the past 12 months and does not pay a dividend, according to The Wall Street Journal. Ahead of earnings, 6.5% of the stock’s float is short.
On valuation, analysts at BofA see operating (non-GAAP) earnings falling in the current fiscal year, but then climbing in 2024 and 2025. Even with that EPS growth, the stock valuation is very high. Coupa’s EV/EBITDA multiple still screams expensive even after a massive stock plunge over the last year. On the bright side, though, is a steady and positive free cash flow yield.
Coupa: Earnings, Valuation, Free Cash Flow Forecasts
BofA Global Research
Coupa’s corporate event calendar shows a Q3 2023 confirmed earnings date of Tuesday, September 6 AMC, according to Wall Street Horizon. An earnings call immediately follows the release. You can listen live here.
Coupa Corporate Event Calendar: Q3 Earning On Tap
Wall Street Horizon
Digging into Tuesday’s earnings expectations, data from Option Research & Technology Services (ORATS) show that Coupa has beaten earnings expectations in each of the last 12 quarters. Even with a stunning beat rate history, shares have traded lower post-earnings in seven of the past eight instances.
Traders are pricing in just a 4.7% earnings-related stock price move using the nearest-expiring at-the-money straddle. That’s a relatively low implied share price change. Fundamentally, the consensus earnings estimate is $0.09 which would be a climb from a loss in the same quarter a year ago.
The Options Angle: Relatively Low Implied Volatility Around Earnings
ORATS
The Technical Take
With an expensive stock and cheap options ahead of the Q3 report, what does the chart suggest? COUP shares appear to be bottoming out in the $50s, but the onus is on the bulls to reverse a downtrend that began way back in the first quarter of 2021. After plummeting through $200 support late last year, there were few buyers until the stock hit $65 back in March. The last few months have been choppy.
Notice how the 50-day moving average has turned sideways. That’s a constructive sign, but I’d like to see that turn positive along with the stock price climbing above the 50-day. Moreover, a key trend line was broken to the downside in August, keeping the bears in charge. A swing long position could be taken in the low 50s with a stop under the June low, but I would avoid the stock now. A climb above $80 would help support a bullish reversal thesis.
COUP: The Downtrend Has Stalled, But No Signs Of Bullish Life Yet
Stockcharts.com
The Bottom Line
Coupa is still an expensive stock despite being down 77% over the last year. The technical picture remains skewed bearish. Ahead of earnings, the trade looks to be long the straddle to play for a potentially volatile swing after Tuesday’s Q3 report given how inexpensive the options are.
