Sprout Social Inc Up 296% Year-Over-Year & Still Has Legs

When Sprout Social Inc Speaks, Twitter, Facebook, & Google Listen

Sprout Social Inc (NASDAQ:SPT) might be the perfect tech stock for the social media age. While going public just before COVID-19 took down the global economy might not have been the best timing, it has actually worked out for Sprout Social stock.

With quarantine orders forcing hundreds of millions of people around the world to stay at home, many businesses shuttering, and millions of people losing their jobs, online social interaction became more important than ever before.

Online giants needed to take advantage of that tsunami of demand. But there’s more to building an unforgettable brand than the products or services a business sells. It’s about making connections.

And there are a lot of connections out there. More than 3.4 billion people use social media. Businesses need to adapt to that reality, or they risk becoming irrelevant. No business wants to be shaded by half the world’s population, but it can happen.

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Some 71% of consumers would purchase a brand after a positive interaction and 23% of consumers would boycott a brand after a negative interaction.

As such, companies need to find ways to attract, acquire, sell to, and serve customers. That’s the cornerstone of social media.

SPT Stock Overview

Sprout Social Inc helps bring brands and people together. The company provides a cloud-based social media management tool that helps businesses of every size better connect with consumers. (Source: “2021 Investor Presentation,” Sprout Social Inc, last accessed September 27, 2021.)

The company’s all-in-one platform enables users to schedule posts, store assets, respond to messages, access customizable reports, and use social-media listening across networks and profiles from a single log-in.

As Sprout Social puts it, “Our suite of deep listening and analytics, social management, customer care and advocacy solutions enable organizations and brands of all sizes to be more open, real and empathetic on social and create the kind of real connection with their consumers that drives their businesses forward.” (Source: “About Sprout,” Sprout Social Inc, last accessed September 27, 2021.)

The company currently has more than 30,000 customers around the globe. Some of its customers and technology partners are Shopify Inc (NYSE:SHOP), Twitter Inc (NYSE:TWTR), Facebook, Inc. (NASDAQ:FB), Pinterest Inc (NYSE:PINS), Kraft Heinz Co (NASDAQ:KHC), and DreamWorks (NYSE:DIS).

Q2 Results Topped the Estimates

For the second quarter ended June 30, Sprout announced that its revenue increased by 42% year-over-year to $44.7 million. Its annual recurring revenue (ARR) went up by 45% year-over-year to $189.1 million. (Source: “Sprout Social Announces Second Quarter 2021 Financial Results Above Guidance Range,” Sprout Social Inc, August 3, 2021.)

The company’s second-quarter operating loss was $5.3 million, versus an operating loss of $8.3 million in the same prior-year period. Its adjusted operating income was $100,000, compared to an adjusted operating loss of $5.9 million in the second quarter of 2020.

The company reported a second-quarter 2021 net loss of $5.4 million, or $0.10 per share, compared to a net loss of $8.3 million, or $0.16 per share, in the same period last year.

Sprout Social Inc reported no second-quarter 2021 adjusted net income, versus an adjusted net loss of $5.8 million, or $0.11 million, in the second quarter of 2020.

The company ended the second quarter with $171.5 million in cash, cash equivalents, and marketable securities. That was up from $167.8 million as of March 31.

In the second quarter, Sprout Social Inc increased its number of customers from 28,122 to 29,612. That has since grown to more than 30,000. The company also grew the number of its customers that contribute more than $10,000 in ARR to 3,936 in the second quarter, up by 55% from June 30, 2020.

Management Raises Full-Year Guidance

For the third quarter, Sprout Social Inc expects to report:

  • Revenue between $47.3 and $47.4 million, representing growth of 41%
  • An adjusted operating loss between $3.9 and $4.3 million
  • An adjusted net loss per share between $0.07 and $0.08

For fiscal 2021, Sprout expects to report:

  • Total revenue between $182.0 and $182.6 million,representing growth of roughly 37%
  • An adjusted operating loss between $10.6 and $11.0 million
  • An adjusted net loss per share between $0.20 and $0.21

Sprout Social Stock Shredding the Broader Market

Sprout Social Inc’s great financial results and growing market share help explain why SPT stock has been shredding the broader stock market. As of this writing, Sprout Social stock is up by:

  • 25% over the last month
  • 55% over the last three months
  • 167% over the last six months
  • 216% year-to-date
  • 296% year-over-year

Chart courtesy of StockCharts.com

Analyst Take

As mentioned earlier, SPT stock could be a perfect tech stock for the current times.

Sprout Social Inc has an enviable list of customers, solid balance sheet, strong financial results, and bullish outlook. The company recently reported its first-ever quarterly adjusted profit and its second consecutive quarter of free cash flow.

All of that has helped Sprout Social raise its 2021 forecast, and could lead Sprout Social stock to keep rising.