Why Couchbase Stock Is Crashing Today

Next-generation database software provider Couchbase (NASDAQ: BASE) delivered a solid earnings report after the close of trading Tuesday, but offered somewhat disappointing guidance. In response, traders punished the stock. Shares plunged by as much as 24.2% during Wednesday morning trading, and were still down by 21.6% as of 1:22 p.m. ET.

Couchbase's third-quarter results and guidance

Couchbase's results for its fiscal 2025 third quarter exceeded expectations. For the period, which ended Oct. 31, revenues rose 13% year over year to $51.6 million, above the $51.1 million that had been the top end of management's guidance range. The company's adjusted loss from operations stopped at $3.5 million, down from a $5.0 million loss in the prior-year period and better than management's most optimistic projection for a loss of $4.5 million. Couchbase also beat Wall Street's consensus estimates across the board.

But it wasn't a perfect report. Revenue guidance for the fiscal fourth quarter came in slightly below the analysts' consensus forecast, and management's guidance for annual recurring revenues (ARR) in fiscal 2025 narrowed around the midpoint of last quarter's forecast. In other words, Couchbase didn't surprise anybody with either stellar growth or unexpected large-scale contracts. Its quarter was more of a quiet continuation of existing trends, including a robust but non-thrilling adoption rate for its cloud-based, subscription-style Capella database service, which is seen as Couchbase's core product for the long haul.

Does Couchbase deserve this huge stock price discount?

Wednesday's sharp sell-off seems nitpicky. Couchbase is growing like a hungry start-up. The company is also converting its static software license deals into recurring software-as-a-service contracts at an impressive pace. But the stock trades at just 4.2 times trailing sales, far below the 13.9 P/S ratio of fellow NoSQL database specialist MongoDB (NASDAQ: MDB), and even below the 9.7 ratio of relatively sleepy industry giant Oracle (NYSE: ORCL).

I agree that Couchbase deserves some investor skepticism and a modest share price discount due to its bottom-line losses, but the market took that premise too far Wednesday. I'm tempted to pick up a few shares of this advanced software stock at these bargain-bin prices.

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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends MongoDB and Oracle. The Motley Fool has a disclosure policy.