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On Wednesday, Guggenheim analyst Howard Ma revised the price target for Couchbase Inc (NASDAQ:BASE) shares, lowering it to $26 from the previous $30, while still maintaining a Buy rating on the stock. Currently trading at $16.25, the stock sits well below analyst targets ranging from $18 to $26, suggesting potential upside according to InvestingPro data. Ma’s adjustment follows Couchbase’s fourth fiscal quarter performance, which showcased a Total (EPA:TTEF) Annual Recurring Revenue (ARR) growth exceeding 17% in constant currency (CC), slightly surpassing the guidance range.
Couchbase reported a record Net New ARR (NNARR) of $19.5 million, marking a 26% year-over-year increase. The company also saw an acceleration in New ARR, including churn, to approximately 29% year-over-year growth, the highest in five quarters. The company maintains impressive gross profit margins of 88.35%, demonstrating strong operational efficiency. The strength in performance was attributed to a combination of renewals, expansions, and the addition of new logos across both its Enterprise (on-premise) and Capella (Cloud) offerings. Large migrations to the platform are anticipated to further accelerate in FY26.
Despite the positive ARR outcomes, the company’s full-year guidance for Total ARR growth, set between 15-17%, was slightly above the consensus, but total revenue guidance of 9-11% growth fell short of the consensus expectation of 13%. InvestingPro analysis indicates the company maintains a strong liquidity position with a current ratio of 2.13, though its overall financial health score remains modest at 1.66. This discrepancy was due to the transition of customers to the cloud-based Capella, which reduces upfront license revenue. Management expects ARR and revenue growth to align in FY27 and forecasts positive free cash flow (FCF) following guidance for near breakeven in the current year.
Ma’s commentary highlighted Couchbase’s strategic importance as a platform for developing modern, AI-powered applications and its potential for maintaining high teens growth with a trajectory towards its Rule of 40 target. The analyst also noted BASE shares are currently undervalued at 3.0x EV/NTM Recurring Revenue, with the new price target implying a 5.0x multiple. This aligns with InvestingPro’s Fair Value assessment, which suggests the stock is currently undervalued. Subscribers can access 8 additional ProTips and comprehensive valuation metrics in the Pro Research Report.
In additional company news, CFO Greg Henry will depart Couchbase after more than eight years to pursue a new opportunity. He will continue as an advisor until May 31. In the interim, Bill Carey, the Chief Accounting Officer (CAO), will serve as the CFO while the company searches for Henry’s successor.
In other recent news, Couchbase Inc. reported impressive fiscal fourth-quarter results, with revenue reaching $54.9 million, surpassing analyst expectations of $53.25 million. The company also achieved record free cash flow of $4 million, a notable improvement from the negative $7.7 million reported in the same quarter the previous year. Despite these strong financials, Couchbase recorded an adjusted loss per share of -$0.30, which was wider than the anticipated -$0.08. For the full fiscal year 2025, Couchbase’s revenue grew by 16% to $209.5 million, and its annual recurring revenue (ARR) increased by 17% year-over-year, reaching $237.9 million.
Goldman Sachs analyst Kash Rangan maintained a Sell rating on Couchbase, adjusting the stock price target from $18.00 to $16.00. Rangan acknowledged the company’s strategic account expansions and increased Capella consumption, but expressed concerns about Couchbase’s growth rate, which remains below 20% for ARR. The competitive landscape is also intensifying, with recent acquisitions in the industry. Looking forward, Couchbase provided revenue guidance for fiscal 2026 of $228-232 million, slightly below the $236.7 million analyst consensus. The company also announced new product launches, including Capella AI Services and integrations with NVIDIA (NASDAQ:NVDA) AI, to tap into the growing demand for AI-powered applications.
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