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On Thursday, Citi analyst Tyler Radke revised the price target for Salesforce.com (NYSE:CRM) stock, reducing it to $295 from the previous $320, while keeping a Neutral rating on the shares. The adjustment follows Salesforce’s first-quarter results, which Radke suggests met modest expectations but did not provide a strong enough case to alter the stock’s rating. According to InvestingPro data, analyst targets for CRM currently range from $225 to $442, with the stock trading at $258.90. InvestingPro analysis indicates the stock is currently undervalued based on its proprietary Fair Value model.
Salesforce’s performance in the small and medium-sized business (SMB) sector was noted as a positive, with a "modest beat" in this area. The company maintains impressive gross profit margins of 77.19% and achieved revenue growth of 8.72% over the last twelve months. However, this was counterbalanced by a deceleration in growth, as the company’s current remaining performance obligations (cRPO) are expected to slow down further in the second quarter, with a forecasted 200 basis points deceleration on a foreign exchange-neutral basis. Radke also pointed to caution in enterprise and key verticals and a deterioration in profitability improvements. For deeper insights into Salesforce’s financial health and growth prospects, investors can access comprehensive analysis through InvestingPro, which offers exclusive ProTips and detailed metrics.
Despite Salesforce’s progress with its Agentforce product, achieving $100 million in annual recurring revenue (ARR), and its broader Data Cloud business reaching $1 billion, Radke remains unconvinced of its immediate impact. He highlighted concerns, including the pending Informatica (INFA) acquisition, which he believes indicates ongoing critical data management issues. InvestingPro data shows Salesforce maintains a moderate debt level with a debt-to-equity ratio of 0.20, suggesting financial flexibility for strategic acquisitions.
The company’s go-to-market strategy is also under scrutiny, with Salesforce planning to ramp up its salesforce by 22% year-over-year to boost Agentforce sales, which Radke interprets as a sign of more aggressive selling rather than organic demand. Moreover, he does not see Agentforce as a current catalyst for re-accelerating growth or profits, especially with an anticipated further slowdown in the second quarter.
The lowered price target of $295 is based on reduced estimates for future free cash flow (FCF) and updated regression inputs according to Radke’s analysis.
In other recent news, Salesforce.com reported robust financial performance across various metrics, capturing the attention of several analyst firms. The company’s first-quarter results showcased an 8% year-over-year revenue increase, surpassing consensus estimates by 1%, as noted by FBN Securities. Salesforce’s non-GAAP earnings per share for the quarter were $2.58, slightly above expectations. Analysts from TD Cowen highlighted Salesforce’s revenue growth and committed remaining performance obligations, which slightly exceeded estimates by 1%. The firm maintained its Buy rating with a $375 price target, citing strong adoption of Salesforce’s Data Cloud and AI capabilities.
FBN Securities reiterated an Outperform rating with a $360 target, emphasizing the company’s 12% growth in current remaining performance obligations and a 14% increase in Platform Cloud revenue. BMO Capital Markets also maintained an Outperform rating with a $350 target, acknowledging Salesforce’s satisfactory performance amid economic uncertainties. Despite a revised price target from $423 to $396, Northland analysts maintained an Outperform rating due to Salesforce’s strategic moves, including the acquisition of Informatica.
Piper Sandler raised its price target to $335, retaining an Overweight rating, following Salesforce’s optimistic second-quarter growth guide and strategic acquisitions. The firm’s analyst noted the expansion of Salesforce’s Data Cloud sector, now exceeding a $1 billion run-rate, as a key growth catalyst. Overall, these developments reflect a positive outlook on Salesforce’s strategic direction and financial health.
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