Fire and Brimstone: Investors Give Sprinklr a Sodomite Punishment (CXM)

If ever a company had its head in the clouds, it’s Sprinklr (NYSE:CXM).

The company offers what it calls a unified customer experience management (CXM) platform that essentially allows you – the customer – to be spied on more comprehensively.

That is, using artificial intelligence supplied by the spymasters at Sprinklr (and operating through the Google cloud), a company’s customer service, marketing and communications teams can be bound together the better to glean from your phone calls, live chat, messaging and emails, information that can later be used by police and government to determine your social credit score.

And maybe upsell you on a more expensive mouse trap.

They have fancy, innocent-sounding names for all that, but the bottom line is the company is losing money and – according to their own guidance – will continue to do so for the foreseeable future.

Fundamentals

A quick look under the hood reveals the following –

1. CXM’s P/E is NON-EXISTENT, i.e., there are no earnings.
2. Forward P/E is also NON-EXISTENT, i.e., company guidance says no positive earnings for at least another year.
3. Dividend Yield is NON-EXISTENT.
4. Price to Book is an alarmingly comical 5.35, and, as mentioned
5. EPS for the last year FELL 267.60%, and what’s more…
6. Next year are expected to remain negative due to an expected “non-GAAP operating loss of between $37 million and $41 million,” as per company guidance.
7. We should also add that long time insiders, ICONIQ Strategic Partners, dumped their $140 million stake in the company at the top of the last retracement high (@$14.79), after which the stock retreated by some 35% (see chart, below).

Just a coincidence, of course.

A scolding is the least of what these folks deserve.

As the daily chart, below, shows, the company has known nothing but declines since it went public exactly a year ago.

It’s a cash furnace, as pyromaniac Elon Musk put it.

And the only question is whether investors will tire of spilling vast sums of money into the CXM dream-cloud while a recession hits, food shortages abound, inflation is soaring and the stock market slides…

You decide.

In the meantime, have a look here –

This is the stock’s action for the last year, and it shows –

1. Both RSI and MACD below their respective waterlines (in green), meaning bears are in control and will remain so until at least such time as both indicators re-surface.
2. As for price, it’s now at the end of a descending triangle formation (in red), with support at $9.50 and resistance at $12.50 and swiftly declining.  The pattern indicates weakening commitment on the part of the bulls to push the stock higher after each rebound.  Eventually, support will be broken and the stock will plumb new lows.
3. MAs are unfurled and heading lower, and price is beneath them all (enlarged, in black), indicating strong downward momentum, which we believe will carry to support at $9.50 – at least.
4. On April 11^th a major sell program by insiders marked the last retracement high (in purple).  Since then, the stock has repeatedly failed to break above the descending trendline.

All of which means it’s now likely to turn lower.

And meaningfully.

So…

A Jew and His Gold recommends you consider selling the CXM August 19^th 10/12.50 CALL spread* for a credit of $0.70 (1.20/0.50) and buying the CXM August 19^th 12.50 PUT for $2.55.  Total debit on the trade is $1.85.

[*Sell the 10 CALL and buy the 12.50 CALL.]

Rationale: we start the trade with the PUT option already $0.11 in the black.

Breakeven arrives at $10.32, just $0.22 below the current price (2%).

Max profit (theoretical) is $10.65 – if the company goes broke.

Max loss is $4.35 (difference between the CALL strikes plus the initial debit).

The G-d of Israel is offering us an opportunity to make rain on CXM’s downside.

!משיב הרוח ומוריד הגשם

Will you be singing when it falls?

Many happy returns!

Matt McAbby

Follow @HughLOHaynew