Goldman Sachs (NYSE:GS) has adjusted its outlook on Couchbase Inc (NASDAQ: BASE), reducing the price target to $17 from the previous $18 while retaining a Sell rating on the stock.
The adjustment comes in the wake of Couchbase's second-quarter fiscal year 2025 earnings report. The database company's total revenue and operating margins exceeded the consensus estimates by 1% and roughly 200 basis points, respectively.
The annual recurring revenue (ARR) of $214 million was in line with the company's guidance.
The firm's third-quarter and full-year fiscal 2025 guidance were largely in agreement with consensus estimates, with a slight upside on operating margins. However, the stock experienced a 10% drop, which the analyst attributes to several factors: the smallest revenue beat to date of only 1%, a deceleration in year-over-year revenue growth with third-quarter guidance suggesting approximately 10% growth, and the churn of two large customers.
Despite the challenges, Couchbase's second-quarter fiscal year 2025 was noted as the third highest gross ARR quarter to date. The company also saw continued momentum with its Capella database-as-a-service, adding 37 customers sequentially and reporting a net new ARR of $5 million, the highest figure tied with the fourth quarter of fiscal year 2024. Management has reiterated the full-year guidance of a 15% increase, suggesting a second-half fiscal year 2025 recovery that appears to be skewed towards the fourth quarter.
In other recent news, Couchbase reported better-than-expected second quarter results, with adjusted earnings per share of -$0.06 surpassing the consensus estimate of -$0.09. Furthermore, the company's revenue grew by 20% year-over-year to $51.6 million, exceeding expectations of $51.11 million.
Looking ahead, Couchbase expects third quarter revenue to range between $50.3-51.1 million, aligning closely with the consensus estimate of $50.69 million. For the full fiscal year of 2025, revenue is projected at $205.1-209.1 million, bracketing the $207.3 million analyst estimate.
Additionally, the company reported annual recurring revenue (ARR) of $214.0 million as of July 31, marking an 18% year-over-year increase. Couchbase concluded the quarter with $156.1 million in cash, cash equivalents, and short-term investments.
InvestingPro Insights
Adding to the analysis by Goldman Sachs, recent data from InvestingPro provides further context to the financial health and market perception of Couchbase Inc (NASDAQ:BASE). With a market capitalization of $955.38 million, the company is trading at a high Price / Book multiple of 7.4, which is indicative of the market's valuation of the company's net asset value. Despite the challenges highlighted in the earnings report, Couchbase holds more cash than debt on its balance sheet, which is a positive sign of the company's liquidity and financial stability. Additionally, InvestingPro Tips reveal that Couchbase's gross profit margins are impressive at 88.53% for the last twelve months as of Q1 2023, which may be a testament to the company's operational efficiency.
However, analysts do not anticipate the company will be profitable this year, and the stock has taken a significant hit over the last six months, with a price total return of -29.41%. This aligns with the concerns raised by Goldman Sachs regarding the company's margin profile and growth prospects amid strong competition. For investors looking for more comprehensive analysis, InvestingPro offers additional tips on Couchbase, which can be found at InvestingPro Couchbase. These insights could be crucial for those considering whether to follow the lead of Goldman Sachs or to take a different investment stance based on Couchbase's financial health and market position.
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