Coupa Software stock extends gains as analysts see a potential deal price at $80+

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By Senad Karaahmetovic

Coupa Software (NASDAQ:COUP) closed nearly 29% higher Wednesday after Bloomberg News reported that private equity firm Vista Equity Partners is exploring a deal to acquire the tech company.

Vista is talking with Coupa, as well as with private-credit lenders who could provide financing for a potential deal, the report added. No deal was imminent as of Wednesday.

Here’s what some Coupa analysts have to say about the potential deal:

Evercore ISI: “In a recessionary environment, COUP’s suite of spend management applicxations is a quick and easy way for companies to cut cost, and on average the payback is less than one year. We would also note given all the supply chain disruptions, CFOs are relying heavily on procurement to help get visibility into forecasting the availability of products, pricing, and vendor diversification.”

Needham and Company: “Strategically, a takeout would allow Coupa to invest more for growth over the next few years versus manage against generating FCF to pay off and restructure debt coming due in 2025 and 2026… We believe a takeout price would need to be closer to 9x EV/Sales FY24 estimates or $90 per share versus current valuation of 6x or $60 per share.”

Raymond James: “While Coupa also has compelling FCF margins approaching ~20%, any PE takeout would need to consider COUP’s ~ $2.2 billion in gross convertible notes, with our math suggesting net debt of ~$1.3 billion. As for a potential takeout multiple, we’d point to recent takeouts for AVLR (8x) and PING (7x) supporting a target in the 7-8x range as reasonable proxies, with PLAN’s takeout multiple at 11x earlier this year likely not realistic in the current environment. We’ve outlined potential prices for shares at various takeout scenarios below, with an 8x takeout potentially reaching $80.”

Wolfe (raises PT to $85 from $55): “We think this deal happens, and we think it goes for 8x CY23 revs. That is where we are setting our PT. With shares trading at ~6x CY23 EV/Revenues (after the move) to finish the day, we would be buyers of the stock right here right now.”

Citi: “This would follow other M&A for Fins software this year including AVLR (9x NTM EV/rev) and PLAN (13x NTM EV/rev) as interest in best in class Financials software remains — with the pull back in valuation a 7x-8x NTM EV/rev multiple may be reasonable given the change in the rate environment vs. Fins peers or a $66-$78 range (28x-32x CY24 EV/FCF on consensus numbers).”

At 07:15 (12:15 GMT), Coupa Software stock trades over 3% higher in pre-market Friday.