On Thursday, Wells Fargo (NYSE:WFC) adjusted its outlook on Sprinklr Inc (NYSE:CXM) shares, a customer experience management platform, by reducing its price target from $14.00 to $10.00, while maintaining an Equal Weight rating on the company's stock.
The decision followed Sprinklr's report of a weaker-than-expected first fiscal quarter, which was impacted by increased budget constraints and customer churn.
The bank's analyst noted that Sprinklr's growth is decelerating and the company faces execution challenges, as well as limited operating margin (OM) offsets.
These factors are likely to continue raising investor questions regarding the company's forward-looking strategy. Despite these hurdles, the analyst reiterated the Equal Weight rating, suggesting a neutral stance on the stock.
Sprinklr's shares are trading at multiples of 2.5 times next twelve months (NTM) enterprise value to sales (EV/S) and 42.5 times enterprise value to free cash flow (EV/FCF).
The new price target of $10 is based on a combination of 2.5 times EV/S and 25 times EV/FCF on the analyst's forward NTM estimates.
The valuation is considered reasonable for a recurring revenue business that is experiencing slower growth and modest margin expansion.
The price target adjustment reflects Wells Fargo's recalibrated expectations for Sprinklr's financial performance and market valuation.
The analyst's commentary underscores the prevailing investor concerns about the company's ability to navigate through the current operational and financial headwinds.
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