The S&P 500 and the Dow have both jumped roughly 20% off their March 23 lows, with Monday’s surge coming on signs that social distancing is working in the U.S. Despite the positivity, no one knows when the economy will start to return anywhere close to normal levels even if the number of coronavirus cases does peak soon.
That said, Sprout Social, Inc. SPT appears ready to weather the coronavirus economy as it helps businesses better connect with their customers across social and digital platforms.
Sprout Social’s Pitch
Simply put, Sprout’s cloud software offerings allow customers to manage their social media efforts across a centralized platform. The Chicago-based firm enables businesses to bring “together social content and messaging, data and workflows in a unified system of record, intelligence and action.”
SPT’s business model looks attractive as companies, organizations, schools, governments, and more attempt to maximize their social and digital efforts, across a growing number of platforms. Sprout operates on the largest platforms, which includes Facebook (NASDAQ:FB) FB and Instagram, Twitter TWTR, Pinterest (NYSE:PINS) PINS, LinkedIn (NYSE:LNKD) MSFT, Google GOOGL, and more.
The firm boasts over 23,000 customers and its fiscal 2019 revenue surged 30% to reach $102.7 million. Investors should also know that Sprout went public in mid-December 2019. “We believe we are well positioned to be a long-term leader in a multi-billion dollar market opportunity based on our exceptional products, a world-class culture and deep commitment to our customers,” CEO and co-founder Justyn Howard said in a statement.
Bottom Line
The nearby chart shows us that SPT shares have fallen after getting off to a somewhat hot early start. Sprout stock closed regular trading Tuesday up 1.48% at $13.75 a share, on lower than average volume, which still puts it over 35% below its highs.
Looking ahead, our current Zacks estimates call for Sprout’s fiscal 2020 revenue to jump 26%, with 2021 set to climb another 30% to hit $167.56 million. Meanwhile, its adjusted loss is expected to shrink substantially this year and next.
SPT’s longer-term positive earnings revision activity helps it earn a Zacks Rank #1 (Strong Buy) at the moment. Sprout is also part of a highly-ranked Zacks industry and it seems like it should be able to succeed during the coronavirus economy and beyond.
However, newly public tech stocks trading at under $15 a share should likely only be scooped up by more risk-taking investors, given the current volatile market conditions. Others might want to wait for Sprout to report its Q1 fiscal 2020 results, which it recently announced will be released on Wednesday, May 6.
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