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On Thursday, Goldman Sachs analyst Kash Rangan reaffirmed a Buy rating on Salesforce.com (NYSE:CRM) shares, maintaining a $400.00 price target. This aligns with the broader analyst consensus, as InvestingPro data shows analyst targets ranging from $247 to $450, with the stock currently trading at $307.33. According to InvestingPro’s Fair Value analysis, Salesforce appears undervalued at current levels. Rangan expressed continued confidence in the company’s growth trajectory, citing several key factors that could drive Salesforce’s performance in the second half of fiscal year 2026. These include expected cyclical improvements in the economy, better sales execution, and the potential of Salesforce’s Data Cloud and Agentforce to establish a competitive edge in the field of agentic AI. The company’s strong foundation is evident in its impressive 76.94% gross profit margins and perfect Piotroski Score of 9, as reported by InvestingPro.
Despite the stock indicating a 5% decline, which may be attributed to the company’s guidance and the market’s anticipation of AI monetization in calendar year 2026/fiscal year 2027, Rangan remains optimistic. He notes that Salesforce’s current scale of over $40 billion and the gradual adoption pattern of generative AI technologies do not undermine the company’s prospects. In fact, the analyst sees possibilities for earlier realization of these benefits based on several indicators. These include the Data Cloud and AI segment reaching a $900 million scale with 120% growth, 3,000 paid Agentforce deals already secured, and the inclusion of data/AI components in all top ten deals.
Rangan anticipates that Salesforce can pursue these opportunities cost-effectively, potentially improving margins by at least 100 basis points. He points to factors such as expanded sales capacity with plans to increase headcount by more than 10%, a 7% rise in productivity, and growing partner involvement. Improvements in broader market conditions, as well as normalization of trends in create-and-close and small and medium-sized business (SMB) sectors, could also contribute to additional revenue with minimal costs.
Goldman Sachs expects Salesforce to sustain robust growth, achieve over 35% operating margins, and reach a free cash flow per share of $17 to $18 in fiscal year 2027. The company’s current financial health is rated as "GOOD" by InvestingPro, which offers 12 additional valuable insights about Salesforce’s performance and prospects in its comprehensive Pro Research Report, available exclusively to subscribers.
In other recent news, Salesforce released its third-quarter fiscal year 2025 earnings, reporting non-GAAP earnings per share of $2.78, which exceeded the consensus estimate of $2.61. However, the company’s revenue of $9.99 billion fell short of the projected $10.04 billion, marking a rare revenue miss for Salesforce. Subscription revenue also came in below expectations at $9.45 billion. Despite these challenges, Salesforce’s remaining performance obligations (RPO) showed a positive trend, totaling $63.4 billion and exceeding the consensus of $62.0 billion.
Analyst firms have adjusted their price targets for Salesforce following these earnings results. JMP Securities reduced its price target from $450 to $430 while maintaining a Market Outperform rating. Stifel also lowered its target from $425 to $375, retaining a Buy rating, and highlighted Salesforce’s potential in AI with its Agentforce platform. RBC Capital maintained its Outperform rating and a $420 price target despite acknowledging foreign exchange-related impacts on the company’s results.
Loop Capital cut its price target from $330 to $300, emphasizing that Salesforce’s growth in current remaining performance obligations surpassed expectations. Canaccord Genuity adjusted its target from $415 to $400, maintaining a Buy rating and citing Salesforce as a strong value play, especially with its AI growth prospects. These developments reflect a mixed but cautiously optimistic outlook from analysts regarding Salesforce’s financial performance and future potential.
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