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As you might know, Sprout Social, Inc. (NASDAQ:SPT) recently reported its third-quarter numbers. Revenues of US$34m were in line with expectations, although statutory losses per share were US$0.13, some 14% smaller than was expected. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Taking into account the latest results, the most recent consensus for Sprout Social from ten analysts is for revenues of US$167.0m in 2021 which, if met, would be a substantial 35% increase on its sales over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 44% to US$0.66. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$165.3m and losses of US$0.61 per share in 2021. So it's pretty clear consensus is mixed on Sprout Social after the new consensus numbers; while the analysts held their revenue numbers steady, they also administered a per-share loss expectations.
Despite expectations of heavier losses next year,the analysts have lifted their price target 7.1% to US$49.60, perhaps implying these losses are not expected to be recurring over the long term. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Sprout Social at US$60.00 per share, while the most bearish prices it at US$33.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Sprout Social's past performance and to peers in the same industry. We can infer from the latest estimates that forecasts expect a continuation of Sprout Social'shistorical trends, as next year's 35% revenue growth is roughly in line with 30% annual revenue growth over the past three years. Compare this with the wider industry, which analyst estimates (in aggregate) suggest will see revenues grow 13% next year. So it's pretty clear that Sprout Social is forecast to grow substantially faster than its industry.
The Bottom Line
The most important thing to take away is that the analysts increased their loss per share estimates for next year. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Sprout Social going out to 2023, and you can see them free on our platform here..
You should always think about risks though. Case in point, we've spotted 3 warning signs for Sprout Social you should be aware of, and 1 of them is a bit concerning.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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