Sprinklr: Has the smoke cleared to buy back in?

Sprinklr Inc. NYSE: CXM offers a cloud-based unified customer experience management (unified-CXM) platform. As a member of the business services sector, Sprinklr enables companies to manage all their customer interactions for all touchpoints and channels in one place to improve customer satisfaction and foster loyalty. The unified nature helps companies to "silo" customer-facing teams to prevent a fragmented customer experience.

The platform's artificial intelligence (AI) engine helps transform real-time customer data into actionable insights. Sprinklr counts 9 of the 10 most valuable brands as clients, including Microsoft Co. NASDAQ: MSFT, Marriott International Inc. NASDAQ: MAR, and McDonald's. NYSE: MCD. After a 33% plunge in its Q4 2023 guidance, shares may be ready for a rally.

Unified-CXM platform features

The Sprinklr platform allows businesses to manage their social media, manage conversations, engage with followers, schedule posts, and analyze social media performance on all the major platforms. It enables fluid customer service like live chat, email ticketing and social media customer service. Sprinklr provides marketing tools for content creation, audience targeting, and ad campaign management to fine-tune your personalized messages to specific targets. The AI engine provides a plethora of analytics, reporting and data-driven insights aimed at measuring the effectiveness of CX strategies and campaigns to target areas for improvement. Check out the sector heatmap on MarketBeat.

Solid fiscal Q3 2024 earnings performance

Sprinklr reported a solid fiscal third-quarter 2024, generating adjusted EPS of 12 cents per share, beating analyst expectations by 5 cents. Revenues grew a healthy 18.5% YoY to $186.33 million, beating consensus analyst estimates for $180.42 million. Its subscription revenue climbed 22% YoY to $170.5 million. Its remaining performance obligations (RPO) rose 34% YoY, and its current RPO (cRPO) rose 19% YoY. The company grew its $1 million customers by 15% YoY to 123. 

The glass is not half empty.

Sprinklr CEO Ragy Thomas underscored the 20% to 40% productivity improvements he foresees in the next five years due to the integration of AI. He feels that Sprinklr will provide essential data to train AI models thanks to the unification of siloed teams. Sprinklr is designed on a single architectural code base, which enables AI to be infused across all its product suites, from Sprinklr Service to Sprinklr Social, Sprinklr Insights, Sprinklr Marketing, and its self-service offerings. Thomas espoused the virtues of AI and how their platform can generate and provide actionable insights "out of the box" as they have been working to pre-train AI across a dozen industries. They launched Conversational AI+ in its Sprinklr Service suite.

Call center-as-a-service (CCaaS) buildout

The company has been establishing itself as a disrupter in the call center-as-a-service (CCaaS) segment. They aim to transform traditional call centers into omnichannel customer engagement hubs. And since they've been so focused on scaling their CCaaS business, they've made slower progress on some of their go-to-market initiatives. This will have a near-term impact on growth for fiscal 2025. Thomas passed the ball over to CFO Manish Sarin. Cue the violin. Get AI-powered insights on MarketBeat.

Lowballing?

The good news on fiscal Q3 2024 results was overshadowed by its 2025 guidance. Revenue growth for fiscal 2025 was cut to 10%, a big drop from the 17% YoY growth that analysts were expecting. CFO Sarin pointed out that the lowered guidance was based on go-to-market dynamics Ragy mentioned earlier and renewal headwinds. Now that Sprinklr Service is at scale, the company is back in a position to refocus on go-to-market efforts, but it "will take several quarters for the full impact to work its way through the P&L. "Sarin insisted that the company will still stay on track to meet its 2027 targets.

BTIG downgrade

On December 7, 2023, BTIG downgraded its rating on shares of Sprinklr to a Neutral from Buy. Analyst Matthew VanVliet pointed out that lowered sales growth for fiscal 2025 "quickly washed away" the brief moment of good news on its fiscal Q3 2024 top and bottom line beat. He cited the trifecta of disappointing news, including downsizing from "numerous" enterprise customers, a few large pipeline deals no longer expected to close, and large customer churn due to financial constraints as reasons for the downgrade.

VanVliet commented, "W" are thus downgrading shares of CXM to Neutral as the limited near-term growth will likely weigh on the pace of margin expansion and FCF generation compared to previous expectations and given the tough macro plus pending headwinds around the renewal cycle, we have limited visibility and confidence into when and how quickly the company might reaccelerate topline growth."

Sprinklr analyst ratings and price targets are at MarketBeat. Sprinklr peers and competitor stocks can be found with the MarketBeat stock screener. CXM has a 5.69% short interest and trades at 85X forward earnings.

Daily death cross in gap fill zone

The daily candlestick chart on CAG illustrates a potential death cross breakdown pattern. This pattern consists of a 50-period moving average crossing down through the 200-period moving average (MA). Currently, the daily 50-period MA and 200-period MA are "kissing" or overlapping in an attempt to cross down. CXM suffered a 33.5% collapse on its 2025 forecasts, causing shares to fall into the previous gap-fill channel between $12.30 and $10.98, which was formed on its strong fiscal Q4 2023 earnings results on March 29, 2023. The new larger gap-fill channel, based on its recent earning reaction, is at $16.70 to $12.11. Meanwhile, shares have been chopping in the earlier gap-fill channel, attempting to stabilize as the daily relative strength index (RSI) attempts to bounce through the 40-band. Pullback support levels are at $10.98 gap fill, $10.41 daily MSL trigger, $9.58 and $8.86.