Sprout Social: Limited Upside For Now
- Sprout Social offers a software solution for participating in the growth of enterprises leaning into social media.
- The company has recently ramped up revenue growth rates above 30%, but growth is likely to normalize back towards the mid-20% rate before COVID-19.
- The stock trades at an insane 23x forward revenue estimates as the P/S multiple expansion has fueled a lot of the recent stock gains.
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As the social media landscape becomes increasingly complex for businesses to manage, Sprout Social (SPT) provides companies with easy to use management software tools for marketing, sales and support. The company offers an attractive recurring SaaS subscription model, but the stock is priced for near perfection after the rally to nearly $80. My investment thesis is bearish on the stock until a more reasonable entry point exists.
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