Eight Capital analyst Adhir Kadve is “incrementally positive on the opportunity ahead” for Coveo Solutions Inc. , emphasizing its partnership with German multinational software giant SAP SE as “a key growth driver” and seeing “robust” opportunities come from artificial intelligence.
“A key partnership which is expected to help accelerate revenue growth in F25 is Coveo’s relationship with SAP,” he said. “Recall that SAP leverages Coveo’s Search and Recommendations capabilities to further enhance its SAP Commerce Cloud platform (formerly known as Hybris). The SAP platform has 3,000 customers who run more than $1-trillion in GMV through the SAP platform. Further enhancing the relationship is Coveo’s Endorsed status within the ecosystem, which incentives SAP sales representatives to sell Coveo’s search capabilities to the same degree as any SAP function. Further, the pipeline generated through the SAP channel includes qualified leads with larger ACVs that come with lower acquisition costs and a higher propensity to close, thus accretive to margins.”
During Eight Capital’s annual innoVIII Technology conference in Toronto last week, Coveo CFO Brandon Nussey touted the “significant” opportunities from AI for Montreal-based company and “more broadly within software spending.”
“Internally at Coveo, he spoke about the ROI that Coveo Relevance Generative Answering (RGA) presents for its end customer, which comes from being able to automate more laborious processes, leading to cost savings,” said Mr. Kadve. “Recall that RGA recently contributed to 20 per cent of Coveo’s Q3 bookings (which happened to be one of the strongest booking quarters for the company in nearly two years). In our view, the product continues to show strong product-market fit, which bodes well for continued adoption of the product. Further, Mr. Nussey contrasted previous technology themes, such as the advent of the internet, the mobile and more recently, the growth of cloud computing and the current AI adoption theme. To which Mr. Nussey noted that he believes every technology cycle only increases the rate of adoption, and that he believes that the current AI adoption cycle will only continue this trend.”
Reiterating his “buy” recommendation for Coveo shares, the analyst hiked his target to $16 from $13.50, exceeding the $13.70 average on the Street.