Stifel cuts Sprout Social price target to $34, maintains Buy

On Wednesday, Stifel analysts adjusted their outlook on Sprout Social Inc . (NASDAQ: NASDAQ:SPT), reducing the price target to $34 from the previous $45, while continuing to recommend the stock as a Buy. Currently trading at $27.26, the stock has experienced a significant decline of 55% over the past year, with InvestingPro data showing it may be in oversold territory. The adjustment follows Sprout Social’s annual report, which showed strong performance in several key areas but also included a first-quarter outlook for 2025 that did not meet analysts’ expectations.

Sprout Social ended the year on a positive note, demonstrating solid growth in billings, calculated remaining performance obligations (CRPO), customers with an annual contract value (ACV) over $50,000, and non-GAAP operating margins. The company maintains impressive gross profit margins of 77.3% and achieved revenue growth of 26.7% in the last twelve months. Despite these achievements, the company’s forecast for the first quarter of 2025 was cautious, anticipating a persistence of the challenging demand trends and market conditions experienced in 2024. According to InvestingPro’s analysis, the company maintains a FAIR overall financial health score.

The company plans to invest in product development and go-to-market strategies to strengthen its position in the enterprise market segment. Stifel’s analysts believe that Sprout Social’s management is adopting a conservative stance at the start of the year, which could be beneficial in the long term.

Stifel’s report highlighted that Sprout Social’s strategies for improving pipeline generation, refining enterprise sales processes, and developing new features in AI content creation, data analysis, influencer marketing, and customer care are expected to drive a steady increase in ACV and stabilize the dollar-based net retention rate (DBNRR).

While the revised price target reflects a more moderate growth forecast, Stifel maintains its Buy rating, signaling confidence in Sprout Social’s potential for steady growth and market positioning advancements. With analyst targets ranging from $23 to $55, and InvestingPro’s Fair Value analysis suggesting the stock is currently undervalued, investors seeking deeper insights can access comprehensive financial metrics and 10+ additional ProTips through the InvestingPro platform’s detailed research reports.

In other recent news, Sprout Social reported its fourth-quarter 2024 earnings, which exceeded analyst expectations with an earnings per share (EPS) of $0.19, surpassing the forecasted $0.15. The company also reported revenue of $107.1 million, slightly above the anticipated $106.76 million, marking a 14% year-over-year increase. Despite these positive results, the company has projected a more conservative revenue guidance for fiscal year 2025, set between $448.1 million and $453.1 million. In response to the earnings report, Goldman Sachs adjusted its price target for Sprout Social from $34 to $29, maintaining a Neutral rating due to concerns over the company’s slowed growth.

Additionally, Cantor Fitzgerald revised its price target for Sprout Social to $38, down from $42, but maintained an Overweight rating, indicating confidence in the company’s long-term potential despite a 4.8% reduction in the FY25 revenue estimate. The firm also increased its adjusted operating income estimate for the same period by 8.6%. Meanwhile, KeyBanc maintained an Underweight rating with a price target of $23, citing a cautious outlook due to disappointing revenue guidance for 2025 and a reset in growth expectations.

Sprout Social’s strategic focus on AI innovations and expansion into the enterprise market continues, as noted in its earnings call. The company aims to leverage its robust subscription revenue segment, which grew by 15%, and its increasing average contract value. As the company navigates fiscal year 2025, analysts and investors will be closely monitoring its ability to address growth challenges and capitalize on strategic opportunities.

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