Couchbase Stock: A First Assessment (NASDAQ:BASE)

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In a world of diminishing mystery, the unknown persists.― Jhumpa Lahiri, The Lowland

Today, we take our first in-depth look at Couchbase Inc. (NASDAQ:BASE). This small tech concern has seen its stock come under pressure in the recent quarter, despite a couple of quarterly earnings ‘beats‘ as so much of the market has gone into a ‘risk off‘ mode over the past six months. Will the prospects for this now ‘Busted IPO‘ rebound over the rest of 2022? We try to answer that question via the analysis below.

BASE Stock Chart

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Company Overview:

Couchbase - Database Offerings

March Company Presentation

Couchbase Inc. is based just outside of San Jose, CA. The company provides a database for enterprise applications worldwide. Its database works in multiple configurations, ranging from cloud to multi- or hybrid-cloud to on-premise environments to the edge to developers. Its services are used by many well-known names across industry sectors.

Couchbase - Well Known Clients

March Company Presentation

The stock currently trades just above $18.00 a share and sports an approximate market capitalization of $800 million.

Couchbase Database Applications

March Company Presentation

Fourth Quarter Results:

On March 9th, the company posted fourth quarter numbers. This concluded the FY2022 year. Couchbase had a non-GAAP loss of 22 cents a share as revenues rose 19% from Q42021 to just over $35 million. Both top and bottom line numbers slightly topped expectations. The company had a similar performance with third quarter results.

The vast bulk of overall revenue ($32.8 million) was from subscription services, which were up year-over-year. Annual Recurring Revenue or ARR now stands at $123 million, up 23% over the past 12 months. Remaining performance obligations or RPO stood at $161.6 million at the end of January, an increase of 58% year-over-year. Gross margins slipped 120bps to 88.2% from Q42021.

On the 4th quarter earnings press release, leadership guided to the following for the fiscal 2023 year.

  • Total revenue between $146.5 million and $147.5 million
  • Total ARR between $160 million and $164 million
  • Non-GAAP operating loss between $57.2 million and $56.2 million

Couchbase FY23 Guidance

March Company Presentation

Analyst Commentary & Balance Sheet:

Since fourth quarter results posted, four analyst firms including RBC Capital and Barclays have reiterated Buy or Outperform ratings on the stock with price targets proffered in the $26 to $35 range. Three of these contained downward price target revisions. Both Morgan Stanley ($22 price target) and Goldman Sachs ($28 price target) have maintained Hold ratings on the stock.

There has been no insider activity in the stock since the company came public last summer. Just over eight percent of the outstanding float in the shares are currently held short. The company ended FY2021 with just over $95 million in cash and marketable securities on its balance sheet against $25 million of long-term debt. Couchbase posted a net loss of $56.3 million during the fiscal year.

Verdict:

The current analyst consensus calls for Couchbase to post an approximate loss of $1.30 a share in FY2022 as revenues grow nearly 20% to $145 million.

Couchbase Revenue Growth

March Company Presentation

The company is recording steady growth both in ARR and the ARR per customer over the past couple of years. The shares also trade for approximately six times trailing revenues, significantly lower than the nine times the equity did when it first came public.

The problem with Couchbase seems to be twofold. It has at least a couple of years left of posting net losses before it achieves profitability. The net loss management projected for FY2023 is similar to that it posted in FY2022. As importantly, the market has turned sour on these sorts of revenue growth stories, unless they are at least nearer to break-even status over the past half year.

Couchbase Growth Initiatives

March Company Presentation

Therefore, I am going to remain on the sidelines around BASE, even if the company does seem to be delivering consistent sales growth, has plans to boost that growth (see above), and is delivering up to expectations on a regular basis.

Couchbase Revenue Growth

March Company Presentation

The longer one lives, the more mysterious life seems.― Francis Brett Young, Cold Harbour

Bret Jensen is the Founder of and authors articles for the Biotech Forum, Busted IPO Forum, and Insiders Forum.

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