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Piper Sandler analyst Brent A. Bracelin initiated coverage on Couchbase, Inc. (NASDAQ:BASE) with an Overweight rating and a price forecast of $22.
According to the analyst, the potential for upside includes the possibility of ARR growth reacceleration next year due to a shift towards Capella, improved operating efficiency that could make free cash flow positive next year, and significant market share gains in a large $100 billion market.
Additionally, the company has a favorable risk-reward profile with a 3.5x CY26E EV/S and 27x EV/FCF.
Bracelin forecasts revenue, margin, and multiple expansion potential over 12-24 months.
Couchbase has carved out a niche at the top end of the database market, serving large and complex applications for Fortune 500 companies such as Walmart, United Parcel Service, Electronic Arts, GE Aerospace, Dow Chemical, Unilever PLC, Cisco Systems, PayPal Holdings, and Domino’s Pizza.
Last quarter, the average ARR per customer surpassed $250K across over 800 customers, the analyst adds.
Although macroeconomic challenges might slow ARR growth to 16% in the second half, the analyst views this as a temporary issue and anticipates a return to growth above 20% next year.
Meanwhile, gross margin has consistently remained strong, ranging from 86% to 90% over the past four years.
The analyst expects FY25 revenues of $206.7 million, with earnings per share of $(0.39).
The analyst projects FY26 revenues of $232.3 million, with earnings per share of $(0.21).
Price Action: BASE shares are trading higher by 1.37% to $18.16 at last check Friday.
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