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On Tuesday, Rosenblatt Securities adjusted its outlook on Sprinklr Inc (NYSE: CXM), lowering the price target from $14.00 to $11.00 while maintaining a Buy rating on the company's shares. The firm cited a need for a more pragmatic view in light of current economic challenges and internal company changes that may delay expected results.
The revision reflects concerns over macroeconomic conditions, artificial intelligence industry headwinds, and cautious spending due to the North American Election. Sprinklr's internal strategic adjustments, aimed at long-term growth, are believed to require approximately six to eight months to fully implement and produce outcomes. Consequently, Rosenblatt has revised its fiscal year 2026 (FY26) revenue growth forecast to 6%, a decrease from the previous 10%, and adjusted its pro forma (PF) earnings per share (EPS) estimate to $0.47, down from $0.49.
The company's recent actions, including a 3% workforce reduction and changes to its go-to-market strategy and leadership, are anticipated to impact near-term growth. In response, Sprinklr's management has revised its FY25 revenue guidance to a 7% year-over-year growth at the midpoint. For the second quarter (Q2), Rosenblatt expects Sprinklr to report total revenue of $194 million, which is consistent with the FactSet Consensus and company guidance of $194 million to $195 million.
Subscription revenue for Q2 is projected at $178 million, aligning with both FactSet consensus and the company's guidance range. Additionally, the firm forecasts non-GAAP Operating Income of $17.4 million, slightly above the consensus of $17.2 million, and non-GAAP EPS of $0.41, which is in line with consensus estimates and guidance.
Sprinklr's aggressive share buyback strategy, which saw 8.3 million shares repurchased for $101.2 million in Q1, could contribute to an increase in pro forma EPS as the share count is reduced.
In other recent news, Sprinklr, a customer experience management platform, has reported a 13% year-over-year growth in Q1 total revenue, reaching $196 million. The company's subscription revenue contributed $177.4 million to this figure, marking a 12% increase.
However, despite this growth, Sprinklr experienced lower net bookings and increased customer churn, leading to a revision of its revenue guidance for FY '25. The company maintains its non-GAAP operating income guidance and has announced strategic changes, including leadership appointments and new partnerships, to address market challenges.
Sprinklr has also introduced new products and established a partnership with Reddit. Co-founder Ragy Thomas has announced Trac Pham as Co-CEO. The company is focusing on leadership upgrades and operational execution to navigate these market challenges. Sprinklr has also expressed its openness to future partnerships or acquisitions.
InvestingPro Insights
Following the recent adjustments to Sprinklr's outlook by Rosenblatt Securities, insights from InvestingPro suggest a mixed financial landscape for the company. Despite the lower price target, Sprinklr's management has demonstrated confidence in the company's value through aggressive share buybacks, a positive sign for investors noted by InvestingPro. Additionally, the company's financial health appears robust with more cash than debt on its balance sheet, providing a cushion against the economic headwinds mentioned.
InvestingPro data shows a market capitalization of $2.38 billion and a high P/E ratio of 40.96, indicating that investors may expect significant earnings growth. However, this growth is not without challenges; analysts have revised their earnings downwards for the upcoming period, and the stock has experienced a considerable decline over the last six months. It's worth noting that Sprinklr is trading at a high EBITDA valuation multiple, reflecting expectations of future profitability, which analysts predict will materialize this year.
For a deeper dive into Sprinklr's financials and strategic positioning, including additional InvestingPro Tips, investors can explore the insights available on InvestingPro. Currently, there are 11 more tips listed on the platform that can provide further guidance on the company's investment potential.
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