On Thursday, DA Davidson updated its outlook on Sprinklr Inc (NYSE:CXM), increasing the price target to $9.50 from the previous $8.00, while retaining a Neutral rating on the company's shares. The revision follows Sprinklr's third-quarter fiscal year 2025 performance, which exhibited stronger-than-anticipated revenue and a boost in cRPO (current remaining performance obligations) growth. The company has demonstrated solid financial performance with 14.72% revenue growth and an impressive 74.22% gross margin.
According to InvestingPro analysis, the stock appears undervalued based on its Fair Value metrics, despite trading at relatively high earnings multiples. However, these positive indicators were somewhat mitigated by ongoing high customer churn rates and challenges in renewing contracts.
The new CEO of Sprinklr, Rory Read, shared his strategy for steering the company towards profitable growth during the earnings call. His plan includes achieving Rule of 40 status—a benchmark in the software industry where a company's combined growth rate and profit margin equal or exceed 40 percent. The analyst from DA Davidson viewed the CEO's action plan favorably.
InvestingPro data reveals that the company is already profitable over the last twelve months, with a return on equity of 9% and strong cash flow generation. Subscribers can access 10+ additional ProTips and detailed financial metrics to better evaluate the company's progress toward its goals.
In addition to the CEO's insights, Sprinklr's management has revised its full-year fiscal 2025 revenue forecast upwards. This positive development is tempered by the projection of lower profitability in the fourth quarter of fiscal 2025 due to increased expenses. The company's efforts to balance growth with profitability continue to be closely monitored by market analysts.
The price target increase to $9.50 reflects a valuation of 2.5 times the projected sales for fiscal year 2026. Despite the raised target, DA Davidson's stance remains neutral, indicating a cautious optimism about Sprinklr's financial trajectory and its execution of the outlined growth strategies.
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