SPT - Sprout Social rises as Goldman Sachs starts with buy rating

2023-07-06 08:51:57 ET

Sprout Social ( NASDAQ: SPT ) shares rose fractionally in pre-market trading on Thursday as investment firm Goldman Sachs started coverage on the social media software company with a buy rating.

Analyst Adam Hotchkiss, who also put a $61 price target on Sprout Social ( SPT ) shares, noted that the industry of social media management is still nascent, but Sprout's "significant" investments in technology to be a single code-base and light services separates it from its peers.

"With larger CRM companies [for example, Salesforce ( CRM )] de-emphasizing their own dedicated social solutions, complemented by tangible ROI proof points in the social software space as organizations broaden internal use cases for social sentiment data, we believe Sprout is legitimizing its place in the broader software stack," Hotchkiss wrote in an investor note.

Investors may wind up focusing on the near-term impact of price increases on Sprout Social's ( SPT ) annual recurring revenue growth, especially when factoring in customer churn compared to annual contract value.

However, it's likely that the company's ability to innovate compared to its peers "provides a durable growth opportunity in lower churn segments of the mid-market and Enterprise," Hotchkiss explained.

More on Sprout Social

• Sprout Social: Growth Should Continue At A Healthy Rate
• Sprout Social: Discounted Valuation Provides An Attractive Investment Opportunity
• Sprout Social: Keep On The Watch List, But Avoid For Now

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