On Wednesday, Sprout Social Inc . (NASDAQ:SPT), a provider of social media management software, received a positive assessment from investment firm Jefferies, which initiated coverage on the company with a Buy rating and a price target of $76.00.
The firm's favorable outlook on Sprout Social is based on multiple factors, including the company's leading position in the market and its robust partnerships. The analyst at Jefferies highlighted that these strengths, combined with positive secular trends, product development, and a strategic emphasis on upselling, position Sprout Social to potentially achieve more than 25% annual growth. The firm anticipates that the company could reach $1B in revenues by the year 2028.
Jefferies further noted that Sprout Social is expected to see a positive inflection in earnings. The company's efficient scaling of operations is viewed as a catalyst for this anticipated growth. According to the investment firm, the resultant margin expansion is likely to contribute to even stronger earnings growth for Sprout Social moving forward.
The analyst's statement underscored the potential for Sprout Social's continued success: "We initiate on social media management software company SPT with a Buy. A market leading platform and strong partnerships, along with favorable secular tailwinds, product expansion, and increased focus on upselling, provide the company with runway for >25% annual growth and $1B in revenues by 2028E. With earnings inflecting positively and operations scaling efficiently, we see margin expansion contributing to even stronger earnings growth."
Sprout Social's current trajectory, as viewed by Jefferies, suggests that investors could expect significant growth and profitability from the company in the coming years, making it an attractive stock in the social media management software sector.
InvestingPro Insights
Following the positive assessment by Jefferies, Sprout Social Inc. (NASDAQ:SPT) continues to demonstrate promising financial metrics, as reflected in the latest data from InvestingPro. The company has a robust gross profit margin of 77.17% for the last twelve months as of Q3 2023, indicating a strong ability to retain revenue after the cost of goods sold is accounted for. This aligns with the analyst's view of Sprout Social's potential for margin expansion and earnings growth.
InvestingPro Tips highlight that six analysts have revised their earnings upwards for the upcoming period, suggesting that the market sentiment is leaning towards an optimistic outlook for the company's financial performance. Additionally, analysts predict that Sprout Social will be profitable this year, which could mark a significant milestone for the company considering it has not been profitable over the last twelve months.
While the company's P/E ratio stands at a negative -57.3, reflecting its current lack of profitability, the strong return over the last three months, with a price total return of 20.19%, indicates investor confidence in the company's growth prospects. Moreover, with a market capitalization of $3.34 billion, Sprout Social is a notable player in the social media management software sector.
For investors seeking more in-depth analysis and additional InvestingPro Tips, including insights on revenue valuation multiples and debt levels, a visit to https://www.investing.com/pro/SPT is recommended. Utilize coupon code "SFY24" to get an additional 10% off a 2-year InvestingPro+ subscription, or "SFY241" to get an additional 10% off a 1-year InvestingPro+ subscription. There are 11 additional tips listed in InvestingPro that can further guide investment decisions.
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