Sprout Social (SPT) Stock Forecast & Price Target

Sprout Social Inc has demonstrated robust financial performance, with aggregate Annual Contract Value (ACV) rising to $14,651, reflecting a year-over-year increase of 19.1%, despite a slight decline in growth rates compared to previous quarters. The company's total revenue has also increased by 14.4% year-over-year, driven by a solid 14.9% growth in subscription solution revenue, which exceeded estimates, indicating stable demand within the market. Additionally, the number of customers contributing over $10,000 in Annual Recurring Revenue (ARR) grew by 7.3%, highlighting Sprout Social's expanding customer base and improving retention metrics, particularly in its enterprise segment.

Sprout Social's negative outlook is primarily driven by a decline in its dollar-based net retention rate, which fell to 104% in 2024 from 107% in the previous year, indicating potential challenges in maintaining existing customer relationships. Additionally, the company's fiscal year 2025 revenue guidance of an 11% growth is below the consensus expectation of 14%, reflecting a slowdown in demand and leading to a significant share price drop post-announcement. Furthermore, the easing of non-GAAP operating margins from 11% in the previous quarter to 9% in FY25 suggests a strategic shift toward investing in growth, raising concerns about future profitability.