SPT · Sprout Social
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a daily close above $13.46
Note written ·
Price against the kill line
13.5% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close above $13.46, on record since 11 November 2026. The shares are up 21.9% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close above $13.46, which is above the $13.35 intraday 52-week high of 23 October 2026, would show the shares leading the S&P 500. So would initial fiscal 2027 revenue guidance implying growth above the 8% of the third quarter of 2026.
Research onlyNot in the portfolio.
Catalyst
Key figures from the filings · Technology
Quarter to 30 September 2026, filed 4 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 125
- Revenue, change on a year (%)
- +8.3
- Gross margin (%)
- 76.6
- Operating margin (%)
- −5.5
- Free cash flow, four quarters ($M)
- 52.1
- Net cash, cash less debt ($M)
- 71.2
- Enterprise value to sales (×)
- 1.3
- Free-cash-flow yield (%)
- 7.5
All filed numbers
What Sprout Social reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 125 | +8.3 | 76.6 | −5.5 |
| first filed | 124 | +10.8 | 77.6 | −2.2 |
| first filed | 122 | +11.2 | 77.0 | −4.8 |
| first filed | 121 | +12.9 | 77.6 | −9.0 |
| first filed | 116 | +12.6 | 77.7 | −7.9 |
| first filed | 112 | +12.5 | 77.7 | −11.0 |
| Pre-tax income ($M) | −6.8 |
| Net income ($M) four quarters: −26.6 | −6.5 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | +1.2 |
| Operating cash flow ($M) | 55.3 |
| Capital spending ($M) | 3.3 |
| Free cash flow ($M) | 52.1 |
| Cash and short-term investments ($M) | 104 |
| Debt ($M) credit line | 32.5 |
| Net cash, cash less debt ($M) | 71.2 |
| Deferred revenue ($M) +7.1% on a year | 186 |
| Backlog, orders not yet delivered ($M) +10.3% on a year | 394 |
| Receivables ($M) | 69.5 |
| Inventory ($M) | Not reported |
| Shareholders' equity ($M) | 207 |
| Market value ($M) | 695 |
| Enterprise value, market value plus net debt ($M) | 623 |
| Enterprise value to sales (×) | 1.3 |
| Enterprise value to operating income (×) | Not meaningful |
| Price to earnings (×) | Not meaningful |
| Price to book value (×) | 3.4 |
| Free-cash-flow yield (%) | 7.5 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 6.8% of shares outstanding sold short, 5.8 days of average trading to cover, −5.9% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $1.5M |
| 12 monthsfrom | $2.0M | $4.9M |
The thesis
Sprout Social's profit recovery is running ahead of its revenue, so the shares are more likely to lag the S&P 500 than to lead it. On 3 November 2026 the company raised its fiscal 2026 earnings guidance but guided fourth-quarter revenue below consensus. The fourth-quarter report, expected around late February 2027, will show whether bookings and the first fiscal 2027 guidance bring growth back.
The rating is Low because the earnings gains come from cost cuts, while revenue growth has not picked up. Third-quarter revenue grew 8% year over year to $125.147M (Form 8-K, 3 November 2026). Fourth-quarter revenue guidance of $124.2M–$125.2M sits under the $125.344M consensus estimate (Benzinga, 3 November 2026).
The market's first reaction followed the revenue guidance. MarketBeat showed the shares down 9.6% on 4 November 2026, the session they closed at $10.78. They have since closed at $11.41 on 11 November 2026. At that price, the market already credits most of the margin recovery. The shares sit near MarketBeat's consensus target of about $11.94 (5 November 2026) and well above the $4.99 closing low of 10 April 2026.
Bullish and bearish views on Sprout Social, Inc
The bull case on Sprout Social, Inc (SPT), in brief: profit guidance rose a second time. The bear case: revenue guidance is flat quarter on quarter.
Bull case
- Profit guidance rose a second time. On 3 November 2026 the company raised fiscal 2026 non-GAAP (adjusted) earnings per share (EPS) guidance to $1.29–$1.31 from $1.11–$1.15, against a $1.13 estimate (Benzinga). Third-quarter adjusted EPS was $0.45 against a $0.29 estimate.
- Adjusted margin reached 21.0%. Third-quarter non-GAAP operating margin was 21.0%, against 11.9% a year earlier, and non-GAAP free cash flow was $26.7M (Form 8-K, 3 November 2026). The company raised its operating-margin target for the end of the fourth quarter to about 18% from 17%.
- First GAAP profit is guided next. Management said on the 3 November 2026 call that it expects its first quarterly profit under generally accepted accounting principles (GAAP) in the fourth quarter of 2026.
- The company is buying back stock. It repurchased 2,562,315 Class A shares for $26.3M, at an average of $10.25, in the third quarter. About $23.8M of the $50M authorization remained at 30 September 2026 (Form 10-Q).
- Analysts raised targets after the report. Barclays raised its target to $14 from $12 on 5 November 2026. On 4 November 2026 Canaccord moved to $13.50 from $10 and Cantor Fitzgerald to $13 from $8 (Benzinga; MarketBeat).
- Larger customers still drive revenue. Trailing subscription revenue from customers paying $30,000 or more in annual recurring revenue (ARR) was $301.5M at 30 September 2026, up 18% year over year (Form 8-K). On 10 November 2026 the company launched AI sentiment analysis for NewsWhip, its media-monitoring product (company news). It gave no revenue figure.
Bear case
- Revenue guidance is flat quarter on quarter. The $124.2M low end of fourth-quarter guidance is below third-quarter revenue of $125.147M (Benzinga, 3 November 2026). Management said on the call that the guidance assumes no improvement in demand.
- The full-year revenue range barely moved. Third-quarter revenue beat the $124.1M top of guidance. Even so, the top of the fiscal 2026 range rose only to $495.7M from $495.6M (Benzinga, 3 November 2026).
- Contracted revenue growth slowed. Current remaining performance obligations, the contracted revenue due within a year, grew 8.4% to $280.2M at 30 September 2026 (3 November 2026 call). Management called this "more of a Q3 blip," citing shorter contracts and the anniversary of the NewsWhip acquisition.
- The larger-customer count stalled. There were 3,925 customers at or above $30,000 in ARR at 30 September 2026, against 3,926 at 30 June 2026 (Form 8-K). Management said on the call that smaller customers still face headwinds.
- Margins rest on a workforce cut. The board approved a cut of about 20% of staff on 8 July 2026. Nine-month restructuring charges were $18.3M, and adjusted results exclude them (Form 10-Q). The third-quarter GAAP operating loss was $6.9M (Form 8-K, 3 November 2026).
- A securities suit is moving forward. On 7 October 2026 a court denied the motion to dismiss a securities class action and lifted the stay on discovery (Form 10-Q). No trial date is set.
- The founder keeps selling. Executive Chair Justyn Howard sold 40,000 shares at $11.02 on 9 October 2026 and 40,000 at $10.77 on 11 September 2026, both under a Rule 10b5-1 trading plan (SEC Form 4 filings).
Price setup
The shares closed at $11.41 on 11 November 2026, up 14.4% over three months from the $9.97 close of 13 August 2026 (adjusted daily closes). The last close is 14.5% below the 52-week intraday high of $13.35, set on 23 October 2026.
After the report the shares bottomed at $10.78 on 4 November 2026 and rose in each of the next five sessions. The last close is above the 50-day moving average of $11.08 and well above the 200-day moving average of $8.29, both as of 11 November 2026.
The $13.35 high of 23 October 2026 is the level that matters. A close above it would mean the market has looked past the soft fourth-quarter revenue guidance. Below it, the gains after the report remain a recovery inside the October range. Among the targets revised after the report, KeyBanc's $10 Underweight target of 4 November 2026 is the only one below the current price (Benzinga).
Catalysts ahead
- 31 December 2026: End of Q4 2026, the company's largest bookings quarter. Management said Q4 bookings will show up more in fiscal 2027 revenue than in the quarter itself, so this quarter's sales set next year's growth rate.
- ~26 February 2027 (est.): Q4 2026 report and first fiscal 2027 guidance. Tests the $124.2M revenue floor and the guided first GAAP-profitable quarter. It also shows whether growth in contracted revenue due within a year recovers from 8.4%.
What would change the view
A daily close above $13.46, which is above the $13.35 intraday 52-week high of 23 October 2026, would show the shares leading the S&P 500. So would initial fiscal 2027 revenue guidance implying growth above the 8% of the third quarter of 2026.
What it trades with
The closest comparisons are marketing and work-management software companies: Sprinklr, Klaviyo and Asana. The drop on 4 November 2026 followed the company's own report, so it was specific to Sprout Social. Sector pressure would show up as the shares falling alongside those companies on days without company news.
A separate risk comes from third-party social platforms. Meta, X, LinkedIn, TikTok and YouTube set the terms of access and pricing, outside the company's control.
The evidence, claim by claim (8)
- Q3 2026 revenue was $125.147M against a $123.808M estimate, up 8% year over year; non-GAAP EPS was $0.45 against a $0.29 estimate. Form 8-K, Q3 2026 results; Benzinga · as of
- Q3 2026 non-GAAP operating margin was 21.0% versus 11.9% a year earlier. Non-GAAP free cash flow was $26.7M. The GAAP operating loss of $6.9M included $17.5M of restructuring charges. Form 8-K, Q3 2026 results · as of
- FY2026 non-GAAP EPS guidance rose to $1.29-$1.31 from $1.11-$1.15. Q4 2026 revenue guidance of $124.2M-$125.2M was below a $125.344M consensus estimate. Form 8-K, Q3 2026 results; Benzinga · as of
- Current remaining performance obligations grew 8.4% year over year to $280.2M. Q3 2026 earnings call; Form 8-K · as of
- Customers at or above $30,000 in ARR numbered 3,925, versus 3,926 at 30 June 2026. Their trailing subscription revenue was $301.5M, up 18% year over year. Form 8-K, Q3 2026 results · as of
- The company repurchased 2,562,315 Class A shares for $26.3M at an average of $10.25 in Q3 2026. About $23.8M of the $50M authorization remained. Form 10-Q for the quarter ended 30 September 2026 · as of
- Barclays raised its target to $14 from $12, Canaccord to $13.50 from $10, Cantor Fitzgerald to $13 from $8 and KeyBanc to $10. MarketBeat's consensus target was about $11.94. Benzinga; MarketBeat · as of
- Executive Chair Justyn Howard sold 40,000 shares at $11.02 in the open market under a Rule 10b5-1 plan. SEC Form 4 filed 13 October 2026 · as of
Sources
- Sprout Social, Inc. - Form 8-K - FY2026 · sec.gov ·
- Sprout Social, Inc. - Form 10-Q - FY2026 · sec.gov ·
- Earnings Whispers ·
- Sprout Social (NASDAQ:SPT) Stock Price Target Raised at Barclays · marketbeat.com ·
- Sprout Social (NASDAQ:SPT) Price Target Raised to $13.50 · marketbeat.com ·
- Barclays maintains Sprout Social at Overweight, raises price target to $14 from $12 · tradingview.com
- Barchart
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