Software startup company Sprinklr, Inc. (CXM), in New York City, operates a cloud-based unified customer experience management platform for organizations internationally. CXM’s Shares declined nearly 9% after its stock market debut on June 23, settling at a $3.7 billion market value for the company. Backed by top investors, such as Hellman & Friedman, Battery Ventures, and Iconiq Strategic Partners, the software company raised $266 million in its downsized IPO .

The stock is currently trading at 26.6% below its all-time high of $26.50, which it hit on June 29. Although CXM’s impressive customer growth and expanded global footprint have boosted its revenue in its last reported quarter, its operational losses have expanded significantly. While the company’s current clientele and its Unified-CMX software could be a silver lining, we think its unstable financials could foster bearish investor sentiment.

Click here to check out our Software Industry Report for 2021

Here is what we think could influence CXM’s performance in the coming months:

Positive Developments

In April, CXM expanded its partnership with EDP, a Portuguese electric utilities company, to accelerate EDP’s digital marketing and customer service transformation. Since the company is leveraging all CXM’s integrated products to drive operational efficiency, CXM’s platform is expected to get a boost.

Also recently, CXM expanded its presence in Singapore with a new R&D center. This should strengthen its  position in the Customer Experience Management market and help it support its clientele in the Asia-Pacific region, including StarHub, Gojek, Samsung and the Changi Airport Group. Since Singapore is a strong business hub, the expansion should position CXM  to meet the rising demand from enterprise customers.

Lack of Financial Stability

CXM’s total revenue increased 19.3% year-over-year to $110.98 million in the first quarter, ended April 30, 2021. This was attributable primarily to an increase in subscription revenue. However, the company’s total operating expenses surged 29.6% from the prior-year quarter to $89.97 million. Its operating loss amounted to $10.70 million, representing a 35.4% increase year-over-year. Also, its net loss grew 31.1% from its  year-ago value to $14.7 million over this period. CXM’s loss per share came in at $0.15.

Mixed Profitability

The company’s 69.8% trailing-12-month gross profit margin is 43.6% higher than the 48.6% industry average. Also, CXM’s 0.9% asset turnover ratio is 42% higher than the 0.6% industry average. But it’s 7.6% levered free cash flow margin is 40% lower than the 12.6% industry average. Furthermore, its net income margin, ROTC and ROA are negative 11%, 15% and 7.8%, respectively.

POWR Ratings Reflect Uncertainty

CXM has an overall C rating, which translates to Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight different categories. CXM has a C grade for Quality. The stock’s lower-than-industry levered free cash flow margin is in sync with this grade.

The company has a C Growth grade, which is in sync with its inadequate growth prospects.

In terms of Stability Grade, CXM has a C. This indicates that the stock is more volatile than its  peers.

In addition to the grades we’ve highlighted, one can check out additional CXM ratings for Momentum, Value, and Sentiment here. CXM is ranked #63 of 132 stocks in the D-rated Software – Application industry.

Click here to view the top-rated stocks in the Software – Application industry.

Bottom Line

A robust AI driven Unified-CXM Platform to better serve its large customer base amid an accelerating pace of digitization have contributed to significant improvement in CXM’s core business. However, the newly listed company’s widening losses could add uncertainties to the stock’s  growth prospects. So, we think investors should wait for CXM to fare better financially before investing in the stock. 

Click here to check out our Software Industry Report for 2021

CXM shares were trading at $19.45 per share on Thursday morning, up $0.01 (+0.05%). Year-to-date, CXM has gained 10.51%, versus a 17.14% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...

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