Sprinklr (NYSE:CXM), an enterprise software provider using artificial intelligence (AI), is showing marked improvement. The company’s most recent quarter showed healthy growth with an 11% year-over-year revenue surge while switching from a loss to a profit. Sprinklr has a wide range of products with the potential for cross-selling and low market penetration in a sizable TAM. However, the company has faced potential challenges, such as fluctuating revenues and ongoing go-to-market adjustments.
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While the stock is down 35% year-to-date, it trades at a discount to industry peers, making it a potentially compelling turnaround candidate for value-oriented investors.
Sprinklr Expanding its Market Share
Sprinklr is a global provider of enterprise cloud software and diverse AI-powered products and solutions drilling into customer service, social media, data insights, and marketing.
Sprinklr operates within a hefty $60 billion total addressable market (TAM), currently only penetrating approximately 1%. CMX’s management has been strategically focused on expanding free cash flow and making significant efforts toward margin improvement. Further, the company boasts a debt-free balance sheet, which opens the possibility of pursuing growth through mergers and acquisitions.
Sprinklr’s Recent Financial Results & Outlook
The company recently issued its Q2 financial results. Revenue of $197.21 million marked a 10.5% year-over-year increase while exceeding analysts’ expectations by $2.83 million. Subscription revenue was $177.9 million, indicating a 9% year-over-year rise. The company’s net cash from operating activities was $21.3 million, with a free cash flow of $16.5 million. Earnings per share (EPS) of $0.06 fell short by $0.01.
As of quarter end, the company’s total cash, cash equivalents, and marketable securities amounted to $468.5 million.
Following the second quarter’s profitable results, CMX’s management has given guidance for the third fiscal quarter, expecting subscription revenue of $177.5 million to $178.5 million and total revenue between $196 million and $197 million. Non-GAAP operating income is anticipated between $19 million and $20 million, with non-GAAP net income per share around $0.08.
For the entire fiscal year, Sprinklr forecasts subscription revenue between $710.5 million and $712.5 million, with total revenue ranging from $785 million to $787 million. Non-GAAP operating income is predicted to be between $80.5 million and $81.5 million, and non-GAAP net income per share is projected at $0.32 and $0.33.
What Is the Price Target for CXM Stock?
The stock has been downward trending, shedding 44% over the past year. It trades at the low end of its 52-week price range of $7.23 – $17.14 while demonstrating ongoing negative price momentum by trading below its 20-day (7.91) and 50-day (8.52) moving averages. The stock trades at a significant discount with a P/S ratio of 2.8x, sitting well below the Software Application industry average of 6.6x.
Analysts following the company have taken a cautiously optimistic view of CMX stock. For instance, Morgan Stanley analyst Elizabeth Porter recently reiterated a Hold on Sprinklr while lowering the price target from $12 to $10 on the shares. She noted the company is addressing execution issues, but more patience is needed.
Sprinklr is rated a Moderate Buy overall, based on 12 analysts’ recommendations and price targets. The average price target for CXM stock is $10.30, representing a potential upside of 33.25% from current levels.
Sprinklr in Summary
Sprinklr is carving itself an identity in the competitive enterprise software space powered by its artificial intelligence capabilities and diverse portfolio. Despite some challenges, the company showed promising recent financial results, with further potential upside. The stock trades at a discount, making it potentially appealing for value-seeking investors looking for a turnaround in progress.
