On Tuesday, Scotiabank (TSX:BNS) initiated coverage on Sprinklr Inc (NYSE:CXM) shares with a "Sector Perform" rating and set a price target of $7.70. The new stock target reflects the bank's evaluation of the company's stock based on expected future cash flows.
The coverage initiation by Scotiabank comes as Sprinklr, a customer experience management platform, undergoes significant internal changes. The company has welcomed several new executives in key positions, including Scott Harvey as Chief Customer Officer, Amitabh Misra as Chief Technology Officer, and Rory Read as CEO, with Trac Pham having a brief stint as co-CEO.
In the third quarter of fiscal year 2024, Sprinklr's management announced a strategic shift to refocus its Go-To-Market (GTM) efforts. This realignment is aimed at better integration across the company's product suites, an initiative expected to span multiple quarters. The second quarter of fiscal year 2025 earnings call reiterated this point, emphasizing the ongoing nature of the transition.
To support the GTM strategy, Sprinklr is undertaking several initiatives. The company is reorienting its sales team and has established a new renewals team to aid in this process. Moreover, Sprinklr is modifying its geographic support model to provide closer proximity to its customer base.
Furthermore, Sprinklr is in the process of updating its pricing and packaging strategies. The company is building an internal team and working with a pricing consultancy firm to develop fewer, more targeted product bundles. These efforts reflect the company's intention to streamline its offerings and improve its market position.
The stock price target of $7.70 per share set by Scotiabank is based on a multiple of 17 times the company's estimated calendar year 2026 enterprise value to free cash flow (EV/FCF). This valuation indicates the bank's expectations for the company's financial performance and its potential growth in the coming years.
In other recent news, Sprinklr Inc. has seen significant changes in leadership and financial outlook. Rory Read has been appointed as the new CEO, a change that DA Davidson believes could potentially reinvigorate growth for the company, although the firm maintains its neutral stance due to uncertainties surrounding these changes.
In terms of financial performance, Sprinklr reported an 11% year-over-year increase in total revenue, reaching $197.2 million for the second quarter of fiscal year 2025. However, the company's operating margins and per-share earnings fell short of projections. For the upcoming third quarter, Sprinklr projects total revenue to be between $196 million and $197 million, with subscription revenue estimated at $177.5 million to $178.5 million.
Analysts have also adjusted their outlook on Sprinklr. Barclays (LON:BARC) downgraded Sprinklr's shares from Overweight to Underweight due to concerns regarding the company's competitive positioning in the genAI and CaaS landscape.
KeyBanc Capital Markets and Rosenblatt have reduced their price targets to $12 and $10.50 respectively, while maintaining overweight and buy ratings. These adjustments were prompted by Sprinklr's recent earnings report, which revealed a shortfall in subscription revenue against consensus estimates.
Despite facing a challenging market, Sprinklr continues to attract new customers, including UBS, Ford (NYSE:F), T-Mobile, Grupo Bimbo, and Planet Fitness (NYSE:PLNT), demonstrating the company's focus on refining its execution and go-to-market strategy. These are among the recent developments impacting Sprinklr's performance in the market.
InvestingPro Insights
Sprinklr's recent strategic shifts and executive changes, as highlighted in the article, are reflected in some of the current financial metrics and InvestingPro Tips. According to InvestingPro data, Sprinklr's revenue growth stands at 14.72% for the last twelve months, with a quarterly growth of 10.5% in Q2 2025. This growth aligns with the company's efforts to refocus its Go-To-Market strategy and improve its product offerings.
Despite the ongoing transition, InvestingPro Tips indicate that Sprinklr "holds more cash than debt on its balance sheet" and has a "high shareholder yield." These factors suggest financial stability during the company's strategic realignment. However, it's worth noting that the stock "has taken a big hit over the last six months," with a -37.97% price total return over that period, possibly reflecting market uncertainty about the ongoing changes.
Interestingly, while Scotiabank set a price target of $7.70, the InvestingPro Fair Value stands at $10.03, suggesting potential upside. For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Sprinklr, providing deeper insights into the company's financial health and market position.
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