Salesforce stock holds steady as RBC maintains Sector Perform rating

Investing.com - RBC Capital reiterated its Sector Perform rating and $250 price target on Salesforce (NYSE:CRM) following the company’s latest earnings report. Currently trading at $238.72, Salesforce is considered undervalued according to InvestingPro Fair Value assessment, despite a 28.25% year-to-date price decline.

The cloud-based software provider delivered in-line revenue results while exceeding expectations on current remaining performance obligation (cRPO), billings, and profitability metrics. Salesforce shares rose approximately 2% in after-hours trading following the announcement. The company maintains impressive gross profit margins of 77.65% and boasts a perfect Piotroski Score of 9, indicating exceptional financial strength.

RBC noted that Salesforce’s outlook suggests moderating organic growth into the fourth quarter of fiscal year 2024. The company raised its fiscal year 2026 guidance modestly across revenue, earnings per share, and free cash flow metrics. Salesforce reported $39.5 billion in revenue for the last twelve months with 8.33% growth.

The investment firm highlighted that Salesforce’s organic revenue outlook excluding Informatica (INFA) reflects steadier growth of approximately 8% at constant currency following early gains related to artificial intelligence initiatives.

Despite results exceeding expectations, RBC sees limited catalysts for multiple expansion given the stable growth and margin trajectory, maintaining its $250 price target which implies approximately 15 times calendar year 2026 estimated free cash flow.

In other recent news, Salesforce has reported its third-quarter results, which have attracted attention from several analyst firms. Piper Sandler maintained an Overweight rating with a $315 price target, highlighting Salesforce’s progress in artificial intelligence, particularly with its Agentforce product, which has reached an annual recurring revenue of $540 million. DA Davidson adjusted its price target to $235, citing stronger-than-expected bottom-line performance despite lower-than-expected revenue. Meanwhile, Bernstein raised its price target to $223, maintaining an Underperform rating, and noted that Salesforce’s quarter was in line with expectations, excluding the impact from the Informatica acquisition.

Cantor Fitzgerald reaffirmed its Overweight rating with a $325 price target, emphasizing upside in contracted revenue pipeline and billings, although cash flow from operations was slightly below estimates. Oppenheimer also reiterated an Outperform rating with a $300 price target, praising the robust growth of Salesforce’s AI businesses and the highest quarterly margin growth and capital returns of the fiscal year. These developments reflect a mix of optimism and caution among analysts regarding Salesforce’s recent performance and future potential.

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