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On Thursday, Goldman Sachs reaffirmed its confidence in Salesforce.com (NYSE:CRM), with analyst Kash Rangan increasing the company’s price target to $385 from $340, while maintaining a "Buy" rating on the stock. Currently trading at $276.03, Salesforce has strong support from Wall Street, with an analyst consensus rating of 1.74 (Strong Buy) and targets ranging from $200 to $442. The adjustment comes on the heels of Salesforce’s robust financial results for the first quarter of fiscal year 2026 and an upward revision of its revenue guidance, excluding certain factors such as foreign exchange tailwinds. According to InvestingPro analysis, the stock appears to be trading below its Fair Value.
The stock showed a positive after-hours movement, indicating a 1% increase, following an initial spike of 5%. This investor sentiment is set against the backdrop of Salesforce’s recent earnings performance, which was juxtaposed with a change in its sales distribution strategy that could potentially signal a more conservative outlook on margins. InvestingPro data shows the company maintains a "GOOD" overall financial health score of 2.95, with particularly strong scores in growth (3.95) and profit (3.57). Despite these concerns, Goldman Sachs views the expansion of Salesforce’s distribution capacity, including a 14% increase in account executives with an expected 22% rise by the end of the year, as a strategic move to capitalize on the Data and Artificial Intelligence (AI) market opportunities.
Goldman Sachs highlighted several factors reinforcing their positive stance, including improvements in the small and medium-sized business (SMB) segment, which is experiencing mid-to-high teens growth. The company maintains impressive gross profit margins of 77.19% and generated $37.9 billion in revenue over the last twelve months. Additionally, emerging products are gaining traction as durable pillars of growth, and the Data Cloud and AI segments have reached a milestone, surpassing $1 billion in scale with a year-over-year growth of 120%. The company’s sales compensation strategy, now linked to both new and renewal performance, is expected to strengthen Salesforce’s renewal base, which stands at approximately 92%.
The bank also noted that Salesforce’s growth in the second half of fiscal year 2026 is expected to be robust. The maturation of agentic technology, combined with a significant amount of data being integrated into the Data Cloud, is anticipated to provide a solid foundation for Salesforce’s AI roadmap. Despite expectations of near-term pressure on current remaining performance obligations (cRPO) renewals due to heightened procurement and contracting levels in the second quarter of fiscal year 2023, a broader recovery is forecasted to tilt towards the fourth quarter and the first quarter of the subsequent year as two-year contract cohorts mature.
In conclusion, Goldman Sachs predicts that Salesforce will continue to deliver sustainable growth, achieve an operating margin of over 35%, and reach a free cash flow per share of $17 to $18 in fiscal year 2027. The company currently maintains a healthy balance sheet with moderate debt levels and strong cash flow generation, as evidenced by its $12.4 billion in levered free cash flow. For deeper insights into Salesforce’s valuation and growth prospects, investors can access the comprehensive Pro Research Report available on InvestingPro, which includes detailed analysis of the company’s financial health, market position, and growth trajectory.
In other recent news, Salesforce has reported strong fiscal first-quarter results for 2026, surpassing Wall Street’s expectations. The company achieved a non-GAAP earnings per share of $2.58, exceeding the consensus estimate of $2.52, with revenue reaching $9.83 billion, surpassing the anticipated $9.75 billion. This performance highlights an 8% year-over-year revenue growth, driven by strong subscription and support sales. Additionally, Salesforce announced an $8 billion acquisition of Informatica, aiming to bolster its data capabilities. The acquisition is expected to be accretive within two years post-closing, according to Salesforce’s Chief Operating and Finance Officer, Robin Washington.
JMP Securities reaffirmed its Market Outperform rating for Salesforce, maintaining a price target of $430, reflecting confidence in the company’s strategic direction. Salesforce’s remaining performance obligations totaled $60.9 billion, marking a 13% year-over-year increase. The firm also raised its fiscal year 2026 revenue guidance to $41.3 billion, indicating confidence in its growth trajectory. The company’s operating cash flow was robust at $6.5 billion, underscoring strong liquidity.
Salesforce is also expanding its workforce, adding 1,000 to 2,000 salespeople, and redeploying 500 customer support employees to focus on data and AI roles. This move aligns with its strategic focus on accelerating AI and data cloud adoption. The company’s recent developments, including the Informatica acquisition, are part of its broader strategy to enhance its market position and drive future growth.
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