Optimistic Outlook: Buy Rating on Sprout Social Amid Short-Term Challenges and Strong Long-Term Strategy

Needham analyst Scott Berg has maintained their bullish stance on SPT stock, giving a Buy rating today.

Scott Berg has given his Buy rating due to a combination of factors that indicate a short-term setback but a positive long-term strategy for Sprout Social. Despite Sprout Social’s lower-than-expected results in the first quarter of 2024, which were primarily due to strategic go-to-market (GTM) changes and a typical enterprise sales cycle affecting their execution, Berg sees these adjustments as aligning the company for success in the higher end of the market. While acknowledging that these changes might dampen the second quarter’s performance, he projects a stronger second half of the year as the company’s strategy starts to pay off.

The reduction in the company’s revenue guidance for the fiscal year 2024 and the note that some of the operating income improvement is due to accounting maneuvers are concerns, yet Berg identifies positive signs in the company’s growth. He points to the acceleration of Tagger’s Annual Recurring Revenue (ARR) and the consistent attachment of multiple products to customer accounts as indicators of underlying strength. These factors, along with a belief in the overall health of the demand environment, bolster Berg’s confidence in Sprout Social’s future performance, leading to his Buy rating on the stock.

According to TipRanks, Berg is an analyst with an average return of -6.6% and a 38.48% success rate. Berg covers the Technology sector, focusing on stocks such as Sprout Social, Five9, and Dayforce Inc.

In another report released today, Barclays also maintained a Buy rating on the stock with a $50.00 price target.

TipRanks tracks over 100,000 company insiders, identifying the select few who excel in timing their transactions. By upgrading to TipRanks Premium, you will gain access to this exclusive data and discover crucial insights to guide your investment decisions. Begin your TipRanks Premium journey today.

Sprout Social (SPT) Company Description:

Sprout Social, Inc. provides online social media management tools for businesses. It offers communication tools, contact management, lead generation, and analytics services. The company offers solutions for enterprises, agencies, small businesses, customer service, social media marketing, and employee advocacy sectors. Sprout Social was founded by Justyn Howard, Aaron Rankin and Gilbert Lara in 2010 and is headquartered in Chicago, IL.