SPT - Sprout Social: Beware Slowing Growth (Rating Downgrade)

2024-02-25 00:48:06 ET

Summary

• Sprout Social stock has rallied over 50% since November and is up nearly 10% this year.
• Meanwhile, companies are cutting down on sales and marketing budgets, impacting Sprout Social's user base (social media managers).
• The stock's valuation is high at ~8x forward revenue, and the company is facing an adverse macro climate, making it a sell recommendation.

Despite a cautiously optimistic market that is energized by the AI boom, investors should maintain tremendous caution around richly valued growth stocks. I've moved more of my portfolio toward cash and value-oriented plays since the start of the year and locked in gains on many of my growth positions....

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