Growth stock Sprout Social is grinding through a consolidation base and approaching a buy point of 69.72. Market demand for the social-media management's segment is expected to surge over 20% per year.
Shares spiked in strong volume Wednesday. Earnings booked the first profitable quarter in over a year. $69.7 million in Q4 sales grew 31% while earnings of 3 cents per share showed recovery from last year's losses.
SPT shares came public in December 2019, raising $150 million at a $814 million valuation.
Technical Ratings
The IBD 50 stock's 83 Composite Rating and 89 Relative Strength Rating are adequately strong.
Sales have grown for the past seven quarters, but earnings growth has been mixed, as evidenced by the less-than-ideal 65 Earnings-Per-Share Rating. Sprout Social resides in the Computer Software-Enterprise industry group, which ranks 70th among IBD's 197 industry groups.
The Chicago, Il. based company designs and runs a web-based social media management platform for businesses. Its cloud software has publishing tools that allow messaging and other content workflows for businesses. The product line integrates content with analytics for several business purposes. These range from public relations, marketing, customer service, sales and product development.
The tech provider offers automation tools that allows businesses to deploy chatbots on Twitter and Facebook, and optimize user engagement through automated message scheduling.
It works across major social media networks, including Facebook and Instagram-parent Meta, Microsoft's LinkedIn and Google-parent Alphabet's's YouTube.
In January, Sprout Social acquired Repustate, which compiles sentiment analysis and natural language processing tools. This purchase extends SPT's own hybrid model for sentiment analysis, which combines machine learning and human rules to analyze more complex sentiment expressed in social media content.
Hadoop Base Taps Huge Opportunity For Growth Stock
Sprout Social uses Apache's open-source Hadoop utilities to store large amounts of data typical in social media platforms. The framework allows quick and random scans of entire data sets, with the capacity to store structured and unstructured data — an advantage for large tracts of data handling.
As social media platforms grow, the need to publish, encrypt, store, retrieve, decrypt and analyze data is growing at a tremendous pace. As noted above, the social-media management software market is expected to grow 21% a year, to $18 billion by 2029. according to Adroit Market Research. This signals strong tailwind for leaders like Sprout Social.
Mutual funds own 70% of outstanding shares of the growth stock.
Mutual funds have bought the stock for the past four quarters and exchange traded funds own shares as well. The WisdomTree Cloud Computing Fund and the ProShares Ultra Nasdaq Cloud Computing ETF hold shares of SPT.
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