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On Wednesday, UBS analysts adjusted their outlook for Couchbase Inc (NASDAQ:BASE) by raising the stock’s price target to $20 from $18, while maintaining a Neutral rating. The company, which maintains impressive gross profit margins of 88% and a strong balance sheet with more cash than debt, received this update following mixed first-quarter results. According to InvestingPro analysis, the stock currently appears overvalued relative to its Fair Value.
Couchbase reported a new ARR of $14.2 million, surpassing the previously implied high-end guidance of $8.0 million. Despite this, revenue growth was modest, exceeding expectations by only $0.6 million. The company’s license revenue outperformed, contributing an additional $2.5 million quarter-over-quarter, compared to the anticipated $0.5 million. With trailing twelve-month revenue of $214.7 million and a market capitalization of $1 billion, the company continues to focus on growth despite current unprofitability.
The analysts noted a significant divergence between the growth rates of annual recurring revenue (ARR) and overall revenue. In the first quarter, ARR grew by 21%, while revenue increased by only 10%. This gap is expected to widen further in the second quarter, with forecasts indicating a 20% growth in ARR compared to a 6% increase in revenue. InvestingPro subscribers can access additional insights through the comprehensive Pro Research Report, which includes detailed analysis of growth metrics and future prospects.
Couchbase attributed this divergence to an increase in Capella mix and more phased migrations. However, UBS analysts expressed concern about the magnitude of the difference and questioned whether other factors might be affecting consumption revenue.
Despite these concerns, UBS analysts maintain a Neutral rating on Couchbase stock, citing stable enterprise traction and an expected growth rate of around 10% for the year.
In other recent news, Couchbase Inc. reported strong first-quarter results, with revenue growing 10% year-over-year to $56.5 million, surpassing analyst expectations by approximately 1.7%. This growth was fueled by a 12% increase in subscription revenue and the rapid adoption of its cloud-based offering, Capella, which now accounts for 17.4% of the company’s total annual recurring revenue (ARR). Piper Sandler raised Couchbase’s stock price target to $20, citing the company’s robust ARR growth of 21% year-over-year to $252 million. Rosenblatt analysts also increased the price target to $22, highlighting the solid performance of Capella.
Truist Securities maintained a Buy rating and a price target of $21, noting the company’s improved momentum and increased full-year ARR and revenue forecasts. William Blair reiterated an Outperform rating, emphasizing the stock’s attractive valuation compared to its SaaS peers. Stifel analysts upheld their Buy rating with a $22 price target, acknowledging Couchbase’s strategic account expansion and significant ARR growth. However, they noted the need for reacceleration in Capella migrations and customer acquisition to sustain momentum. Despite these challenges, Couchbase remains focused on leveraging its strategic initiatives and technological advancements to drive growth.
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