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On Wednesday, Cantor Fitzgerald analyst Brett Knoblauch adjusted the price target for Sprout Social Inc . (NASDAQ:SPT), reducing it to $38 from the previous $42, while maintaining an Overweight rating on the company’s shares. The revision reflects a new valuation approach, shifting from a 6x 2024 EV/Sales multiple to a 5x 2025 EV/Sales multiple. According to InvestingPro data, the stock currently trades at $26.46, suggesting potential upside to the new target despite recent market pressure.
Knoblauch’s assessment of Sprout Social’s investment appeal is largely based on its current valuation, noting that the stock trades at 3.5x 2025 estimated EV/Sales. He points out that when Sprout Social was growing at a 30% rate, it enjoyed a valuation with a double-digit multiple. The analyst suggests that reigniting the company’s growth could lead to a significant re-rating of its stock. InvestingPro data reveals the company maintains impressive gross profit margins of 77.31% and has achieved revenue growth of 26.7% over the last twelve months, though the stock has declined 55% over the past year.
Despite the lowered price target, the analyst remains confident in the company’s prospects, as indicated by the reiteration of the Overweight rating. This decision comes with a recalibrated financial outlook for Sprout Social, where the FY25 revenue estimate has been decreased by 4.8%. On the other hand, the adjusted operating income estimate for the same period has been increased by 8.6%. InvestingPro analysis suggests the stock is currently undervalued, with additional insights available in the comprehensive Pro Research Report, which provides detailed analysis of the company’s financial health and growth prospects.
The adjustment of the price target and financial estimates by Cantor Fitzgerald represents a nuanced view of Sprout Social’s future performance. The firm’s analysts are aligning their expectations with the company’s current trading multiples and anticipated financial results. The Overweight rating suggests that despite the reduced price target, Cantor Fitzgerald continues to see Sprout Social as a stock with positive potential.
In other recent news, Sprout Social Inc. reported its fourth-quarter 2024 earnings, exceeding analysts’ expectations with an earnings per share (EPS) of $0.19, compared to the forecasted $0.15. The company’s revenue also surpassed projections, reaching $107.1 million against a forecast of $106.76 million. Despite these positive results, Goldman Sachs revised its price target for Sprout Social to $29.00 from $34.00, maintaining a Neutral rating due to concerns about the company’s slowed year-over-year revenue growth, which decelerated to approximately 14%. The company has issued a conservative revenue guidance for fiscal year 2025, projecting revenue between $448.1 million and $453.1 million. Meanwhile, KeyBanc analysts maintained an Underweight rating on Sprout Social, citing disappointing revenue guidance for 2025, which has led to a downward revision of growth estimates. Sprout Social’s shift towards the enterprise market and increased customer budget scrutiny have been highlighted as challenges affecting its growth trajectory. As the company enters 2025, the market will be closely monitoring its ability to navigate these challenges and return to a growth path that meets investor expectations.
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