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Founded in 2009 and based in New York City, Sprinklr (CXM) provides a unified customer experience management (CXM) platform through cloud-based software. This platform helps businesses manage customer interactions across digital channels like social media, messaging, and chat.

Commanding a market cap of $2.44 billion, shares of the company have nosedived following not-so-upbeat revenue guidance, and some corresponding bearish notes from top brokerage firms - and former bulls - like Cantor Fitzgerald and D.A. Davidson.

While Cantor downgraded the stock to “Neutral” from “Overweight,” cutting the price target from $16 to $10, D.A. Davidson lowered its rating to “Neutral” from “Buy,” with a target price of $9 - down from $16 earlier.

Since the company's earnings report came on June 5, CXM stock is down 17.3%. On a YTD basis, it's down 25.5%.

Is the sharp decline an overreaction, or should investors follow bullish analysts in jumping ship on CXM? Here's a closer look at what's behind the latest moves in the stock.

Q1 Results Top Estimates

Results for the fiscal first quarter that ended April 30 were impressive, as Sprinklr managed to surpass consensus estimates on both the revenue and earnings front. Revenues for the quarter came in at $196 million, up 13% from the previous year. Subscription revenues, which made up almost 91% of total revenues, went up by 12% in the same period, denoting that the company's core operations are growing. Over the past three years, the company has recorded a revenue CAGR of 23.08%.

Adjusted EPS displayed even sharper yearly growth at 50%, coming in at $0.09 to surpass the consensus estimate of $0.07. Notably, over the past five quarters, Sprinklr's EPS has beaten expectations each time.

Sprinklr reported net cash from operating activities of $41.71 million and free cash flow of $36.19 million, denoting YoY growth rates of 124.7% and 153.9%, respectively. Overall, the company ended the quarter with a cash balance of $135.97 million, much higher than its debt levels of $51.59 million.

Key operating metrics relevant for a platform company like Sprinklr, like the $1 million customer count, remaining performance obligation (RPO), and current RPO, increased by 20%, 30%, and 19% from the previous year, respectively.

AI Tailwinds

The proliferation of artificial intelligence (AI) across the tech industry has been a massive trend, and the CXM market is no exception. According to this report, the applications of AI in the customer experience market are poised to reach a value of $76.7 billion by 2033, up from $10.5 billion in 2023, indicating a CAGR of 22%. Given its existing footprint in the space, Sprinklr is expected to be a natural beneficiary of this growth.

Notably, Sprinklr AI seems to be well-positioned to capitalize on this trend. Sprinklr AI can make more than 10 billion predictions per day with more than 100 million training data points powered by 900+ pre-built AI models covering more than 150 languages. Further, at its latestearnings call the company announced several AI-driven features.

Sprinklr is expanding its offerings with two key notable product launches and a strategic partnership. Sprinklr Surveys brings generative AI-powered surveys to the platform, allowing customers to gather all types of feedback from a unified location. This marks Sprinklr's entry into the feedback management market.

Next, Sprinklr Voice Connect offers a powerful contact center connection layer. This vertically integrated CPaaS solution integrates Sprinklr services and telephony for high-quality voice interactions.

Looking beyond its products, Sprinklr partnered with Indian IT giant Tech Mahindra to develop an AI-focused CXM platform. This platform will deliver unified customer experiences across touchpoints and support go-to-market strategies.

Sprinklr isn't just leveraging its AI expertise; it's also expanding its social media reach. A new partnership with recently-listed social media platform Reddit (RDDT) allows Sprinklr customers to integrate Reddit into their tailored digital advertising strategies, making it a business-critical channel.

Analyst Opinion

Overall, analysts still consider Sprinklr stock a “Moderate Buy,” with a mean target price of $12.91. This indicates an upside potential of about 43.4% from current levels. Out of 14 analysts covering the stock, 6 have a “Strong Buy” rating and 8 have a “Hold” rating.

On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.