Shares of Sprout Social Inc (NASDAQ:SPT) tanked in early trading on Thursday.

The company's soft performance so far in 2024 suggests that its turnaround will take longer to materialize than was earlier expected, according to KeyBanc Capital Markets.

Analyst Jackson Ader downgraded the rating for Sprout Social from Sector Weight to Underweight, while keeping the price target unchanged at $28.

The Sprout Social Thesis: The company's bookings this year have been weaker than what "even the sharply slower reported numbers imply," Ader said in the downgrade note.

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The current remaining performance obligation (RPO) and bookings are concerning given that the duration of Sprout Social's average contract is less than a year, he added.

"Current bookings and RPO are inflated when monthly cohorts are converted to annual" and indicate that the company's bookings in the first half may have declined year-on-year on an organic basis, the analyst explained.

He further stated that the current consensus estimates for 2025 appear "too optimistic."

SPT Price Action: Shares of Sprout Social had declined by 4.94% to $32.24 at the time of publication on Thursday.

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