SPT & INSP Report. All’s Good.
Sprout Social (SPT) reported Q3 results yesterday that beat expectations. Revenue was up 46% to $49.1 million versus expected growth of 42%. Adjusted EPS was -$0.03 versus $0.01 expected. Customer count grew 20% to 30,705, customers spending over $10K in ARR grew 57% to 4,380, and customers spending over $50K grew 98% to 478. The company’s work to grow in the mid-market and enterprise segments are bearing fruit (and should continue to do so). Management sees Q4 revenue growth of 37% and full-year 2021 revenue growth of 40%, to around $186 million, and adjusted EPS of -$0.15 (versus -$0.21 consensus). Finally, Sprout announced an integration with WhatsApp messaging to bring that platform into its product suite. Stepping back, this growth story is alive and well. That said, with the stock trading with an EV/2022 estimated revenue multiple near 30 we’ll need investors to keep paying a handsome premium for SPT to go meaningfully higher. At this stage in the game, with tapering set to begin soon and heightened focus on interest rates (likely to go up) I think sitting on our current SPT position and not adding to it is the right call. Moving to hold. HOLD
Inspire Medical (INSP) reported Q3 results that beat expectations again. Revenue grew 72% to $61.7 million versus $53 million expected. The company activated 68 new implanting centers in the U.S. (guidance was 48 – 52 per quarter), bringing the total to 603, while 11 new U.S. sales territories brings the total to 141. Strong U.S. performance picked up a little slack overseas. We don’t yet know the final reimbursement rate for Inspire procedures in the ASC, but we should get that within a few weeks. Full-year 2021 revenue growth guidance was increased (by more than the Q3 beat) to 90% - 92% ($219 - $221 million) versus consensus of $210 million (+82%). With an innovative way to treat obstructive sleep apnea (OSA) and more product innovations in the pipeline, with room to grow meaningfully both international and in the U.S., Inspire remains an attractive stock. Analysts are raising price targets. J.P. Morgan is at 325, Lake Street at 320, SVB Leerink at $325, Wells Fargo at $305, Piper Sandler at $305, just to name a few. Upgrading to buy. BUY