Amid the COVID-19 pandemic’s deep disruptions, cloud services have been a godsend regarding keeping the economy and people’s lives from coming to a complete halt. Enterprises are increasingly adopting cloud-based platforms to function efficiently and flexibly amid remote working requirements.
Because cloud computing’s long-touted benefits, such as agility and stability, are becoming a necessity for conducting business, a growing number of individuals and businesses are adopting it. The demand for these services should continue increasing because public and private cloud servers have become the new standard for daily frontend and backend operations, information storage, and disaster recovery. The global cloud computing market is expected to hit a $760.98 billion value, growing at a 18.6% CAGR over the next six years.
Since a reliance on cloud computing is expected to increase, Box, Inc. (BOX) should deliver solid returns based on its increasing global footprint and digital innovations. But we think it is best to avoid Coupa Software Incorporated (COUP) in the near-term owing to its bleak growth prospects and weak financials.
Stock to Buy:
Box, Inc. (BOX)
Formerly known as Box.net, Inc, BOX is a single, secure, easy-to-use cloud-content management platform that is designed for the entire content lifecycle, from file creation and sharing, to co-editing, signature, classification, and retention. It offers web, mobile and desktop applications for cloud content management on a platform for developing custom applications, as well as industry-specific capabilities.
In March, BOX teamed up with Dolby Laboratories Inc. to collaborate on a new integration that makes production-quality audio as simple as uploading a file to BOX. In the partnership, BOX’s seamless and cost-effective audio enhancement tools are combined with Dolby’s long-term expertise in enabling best-class entertainment experiences. This should help BOX in creating a professional and convenient experience for its viewers and listeners and in ultimately increasing its customer base.
The company’s revenue increased 8% year-over-year to $198.9 million for the fourth quarter, ended January 31, while its non-GAAP gross profit grew 10.9% year-over-year to $145.6 million. Its non-GAAP operating income increased 196% from the prior-year quarter to $36.4 million. Its EPS increased 214.3% from its year-ago value to $0.22.
BOX is expected to witness 9.6% revenue growth year-over-year to $844.73 million in the fiscal year ending January 31, 2022. Its EPS is estimated to increase 70% from its year-ago value to $0.17 in the current quarter, ended April 30. BOX’s stock has gained 30.7% over the past year.
BOX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. POWR Ratings are calculated by considering 118 different factors, with the weighting of each optimized to improve overall performance.
BOX has a B grade for Growth, Value and Quality. Among the 75 stocks in the Technology – Services industry, it is ranked #2.
Click here to see the additional POWR Ratings for BOX (Momentum, Stability and Sentiment).
Stock to Sell:
Coupa Software Incorporated (COUP)
COUP, a leading provider of Business Spend Management (BMS) solutions, offers a comprehensive, cloud based BSM platform that has connected hundreds of organizations with more than seven million suppliers globally. The company markets its platform primarily through a direct sales force. It has a strategic partnership with Japan Cloud Computing L.P to establish a joint venture, Coupa K.K.
The stock is currently trading at a premium valuation. COUP’s trailing-12-month Price/Book value currently stands at 16.4x, which is 219.3% higher than the 5.14x industry average.
Although COUP’s revenue has increased 47% year-over-year to $163.5 million for the fiscal fourth quarter, ended January 31, its non-GAAP operating income came in at $11.2 million, representing a 15.8% decrease. The company generated $13.0 million in net income, representing an 13.3% decline from its year-ago value. Moreover, COUP reported an EPS of negative $0.17 for this period, compared to its year-ago $0.21 EPS.
Analysts expect COUP’s EPS to be negative $0.19 in the quarter, ended April 2021, representing a 195% decline year-over-year. The company’s stock has declined 35% over the past 3 months.
COUP’s POWR Ratings are consistent with this bleak outlook. It has an overall F rating, which equates to Strong Sell in our POWR Ratings system. COUP has a D grade for Growth, Stability and Quality. Of the 59 stocks in the D-rated Software – Business industry, it is ranked #57.
To see the additional POWR Ratings for Momentum, Sentiment and Value for COUP, Click here .
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COUP shares were trading at $237.57 per share on Tuesday afternoon, up $3.04 (+1.30%). Year-to-date, COUP has declined -29.90%, versus a 11.26% rise in the benchmark S&P 500 index during the same period.
About the Author: Samiksha Agarwal
Samiksha Agarwal has always had a keen interest in financial markets. This has led her to a career as a financial journalist. Through her extensive knowledge of fundamental analysis, her goal is to help investors identify untapped investment opportunities in the stock market. More...
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