Here’s everything you need to know about SPT - Sprout Social. If you still believe the company is not undervalued after reading this, I can’t help you.
1. In the era of AI, data plays a crucial role. Sprout Social connects to over 30 social networks and processes more than a billion messages daily. This vast data volume empowers AI to generate substantial value. Meta, X, YouTube, Reddit, and other platforms possess their own data. However, Sprout Social stands out as one of the few companies with cross-platform access. In my opinion, considering its current market capitalization, the market is significantly underestimating the potential of this amount of data.
2. Social media is emerging as a lucrative growth channel for companies, prompting them to allocate increasingly larger budgets towards social media marketing. Recent surveys reveal that an impressive 80% of CMOs intend to shift their spending from traditional channels to social media, further emphasizing Sprout Social’s strategic significance.
3. Product innovation: Sprout is investing significantly in new products, particularly AI and automation, which explains the absence of GAAP profits. In 2024, Sprout introduced numerous AI-powered features, such as automatic sentiment analysis and content recommendations. In August 2025, Sprout launched a suite of new integrations, including TikTok listening, Bluesky, and an expanded Salesforce integration, to provide real-time social intelligence to customers. These rapid innovation cycles enhance Sprout’s competitive position and create customer value through efficiency gains and improved insights.
Why the turnaround is likely to happen now:
- Sprout Social announced in an SEC filing dated August 26, 2025, that its CEO and board members will cease their automatic stock sales and transition to purchase plans. Starting in November 2025, there will be insider buying. Looking at similar cases from the past, changing automated sale plans to automated purchase plans often leads to a lift in the share price.
Example 1, ticker ASAN: Change from sale to purchase plans announced on March 8, 2025. From announcement to 5 days after insider buys began: +47.58% move.
Example 2, ticker PLUG: Change from sale to purchase plans announced on January 17, 2019. From announcement to 5 days after insider buys began: +85.71% move.
- Sprout has been executing a strategic shift for several months. It’s moving upmarket and, instead of monthly contracts, is increasingly focusing on annual and multi-year deals. This shift has been successful, as Prout has recently won larger customers, including Zoom, Honda, the U.S. Department of Transportation, NASCAR, and more. The number of large customers (>$50k in annual spend) has grown by +44% recently.
- I anticipate a significant positive surprise in the upcoming quarterly report. Sprout has already hinted that many existing contracts are up for renewal in the second half of the year. This could potentially lead to a major positive surprise in the upcoming Q3 numbers, as Sprout is expected to acquire new (enterprise) customers and renew many existing contracts.
Risks:
- „But there is an investigation“. That’s for wrongdoing. I think there were 200 cases like this last year. Let’s say they have to pay $25 million - $23 million will be paid by D&O, and Sprout will pay $2 million. Thats nothing.
- „I make more profit than they do“. Value doesn’t necessarily equate to profit. Over the past three years, they’ve acquired three companies. The product has received new features and a significant amount of AI integration. Growth is more crucial than profit, as profit will naturally follow. Sprinklr became profitable too early, resulting in revenue growth of about 6%, but the company is currently struggling. Sprout, on the other hand, has experienced double-digit revenue growth and is poised for even greater success as it shifts towards serving upmarket and larger customers, like Honda and NASCAR. Trust me, profits will follow.
- „High SBC“. Yes, this is true, and I don’t like it either. As far as I know, in 2023, they offered their employees SBC. However, at least SBC didn’t increase last year and instead remained flat. Nevertheless, SBC is high, and I don’t like it either. Without it, they would already be profitable. What’s important to me is that they are operational profitable, even though they are not GAAP-based. GAAP-based profit will follow.