Sprout Social: Key Winner In Social Media Software

Summary
  • Sprout Social is one of the leading providers of social media management software with strong revenue growth and customer traction.
  • As more traffic and customer engagement modalities shift to social media, solutions by vendors like Sprout Social will become increasingly important.
  • The current valuation is undemanding, and I see significant upside from current levels.

Investment Thesis

Sprout Social (NASDAQ:SPT) is a platform used to manage social media accounts across a variety of different services including Twitter, Instagram, Pinterest, and Google. This platform provides an all-in-one solution that covers many core use cases including user engagement, content publishing, analytics, and collaboration. The company has performed well even through COVID as social media engagement became more important as offline consumer interactions became more restricted.

From a pure product perspective, the company goes to market with the following key product features:

  • Engagement – This feature set allows customers and their clients to communicate across multiple social media channels in a central location.
  • Publishing & Scheduling – This feature allows customers to schedule various multimedia posts across a variety of social media accounts
  • Analytics – The company’s analytics features allow customers to understand usage and performance of the platform and of their social media activities.
  • Listening – The listening feature set allows the company to gather data across social media channels to drive insights on the customer base.

Social media has become an increasingly important part of both digitally-native and non-digitally-native companies’ go-to market strategy as e-commerce and overall consumer behavior has migrated to digital channels. Additionally, beyond just transactional sales, much of the historical customer interaction whether it is general marketing or customer service has also moved to social media channels. This has driven the increasing importance of social media to enterprises. However, the adoption of tools to manage social media channels is still relatively light. According to the company’s analysis, only 5% of the 90 million businesses that have a social media presence actually have dedicated software to manage it. Thus, there is significant room for Sprout Social to grow. It is also why I believe that Sprout Social is a good way to get a call option on the overall enterprise shift towards social media channels.

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