Hold Rating on Sprout Social Amidst Revised Growth Forecasts and Reporting Concerns

In a report released yesterday, Clarke Jeffries from Piper Sandler downgraded Sprout Social (SPT – Research Report) to a Hold, with a price target of $40.00.

Clarke Jeffries has given his Hold rating due to a combination of factors impacting Sprout Social’s near-term prospects. Despite a history of strong growth, the company has recently faced challenges that have led to a reduction in growth forecasts, specifically in their revenue and customer metrics. The first quarter of the year did not bring the rebound that was anticipated, and instead, continued a trend of disappointing annual recurring revenue (ARR) figures. Furthermore, Sprout Social’s decision to stop reporting ARR and customer count metrics has led to additional uncertainty regarding the company’s performance and prospects.

Moreover, Jeffries acknowledges the company’s long-term potential, noting a 20%+ compound annual growth rate (CAGR) and nearly 20% free cash flow (FCF) margins by 2028. However, current investor sentiment is weighed down by a lack of clarity on the company’s growth trajectory, particularly with a second half of the year that is expected to show a high-teens growth rate inclusive of Tagger’s contribution. These factors, combined with a revised and lowered full-year revenue guidance, have led to the Hold rating, with a lowered price target of $40, as it appears that a positive shift in investor sentiment may be several quarters away.

According to TipRanks, Jeffries is a 2-star analyst with an average return of 0.0% and a 48.15% success rate. Jeffries covers the Technology sector, focusing on stocks such as Trimble, Cadence Design, and Tyler Technologies.

In another report released today, Robert W. Baird also maintained a Hold rating on the stock with a $45.00 price target.

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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.