Shares of Coupa Software (NASDAQ:COUP) fell 16.3% in September, according to data from S&P Global Market Intelligence. Early in the month, the company delivered strong second-quarter results, but the stock was caught up in the market’s wider pessimism about the tech sector.
The maker of business spend management tools actually crushed Wall Street’s second-quarter expectations. Earnings tripled year over year to $0.21 per share while revenues rose 32% to $125.9 million. The average analyst would have settled for earnings near $0.08 per share on sales in the neighborhood of $119 million.
Management also issued bullish guidance for the third quarter and raised its full-year targets. The report inspired a plethora of rosy analyst reports and raised share-price targets. The stock still closed 6% lower the next day, continuing a string of daily drops that started with the tech sector panic of Sept. 3.
I can’t blame Coupa’s investors for getting nervous. The stock price is still nearly double what it was a year ago, and it has risen by a remarkable 750% in three years. The stock was ripe for a correction last month, and even in its wake, Coupa still can’t be called “cheap” or “affordable” by any reasonable standard. We’re looking at a powerful growth stock barreling down Wall Street like a tank, armed with tons of revenue growth in the face of generally negative earnings. The next few quarters may be rocky, depending on investor reactions to the ongoing COVID-19 crisis and other events beyond Coupa Software’s control. In the long run, this company will do just fine, and so will its shareholders.