KeyBanc Downgrades Sprout Social to Underweight via Investing.com

Investing.com – Sprout Social Inc (NASDAQ: ) fell 6.2% on Thursday after analysts at KeyBanc downgraded the company from Sector Weight to Underweight.

Despite the company’s strategic shift from monthly customers to larger annual offerings, metrics reporting its bottom line appear skewed.

KeyBanc’s analysis reveals that Sprout Social’s current remaining performance obligation (RPO) and current booking metrics are inflated due to the conversion of monthly cohorts to annual contracts.

After adjusting for these figures, analysts found that bookings for the first half of the year may not only have slowed, but may have also declined year-over-year on an organic basis. This performance is expected to have a longer impact on the company’s future earnings.

Analysts also noted that expectations for a re-acceleration in revenue in 2025 are too optimistic, suggesting that it could take longer for Sprout Social to meet market expectations, especially given the high likelihood of downward revisions and compression additional multiple for shares.

Given this rating, KeyBanc lowered its forward estimates and set a downside price target of $28, down from the current price of $33.92.