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On Thursday, Scotiabank (TSX:BNS)’s Allan Verkhovski adjusted the price target on Salesforce.com (NYSE:CRM) shares, reducing it from $440.00 to $400.00, while retaining a Sector Outperform rating. The software giant, with a market capitalization of $294 billion, maintains strong financial health according to InvestingPro analysis, boasting a perfect Piotroski Score of 9 and impressive gross profit margins of 77%. Verkhovski highlighted Salesforce’s robust year-end performance, with constant currency calculated remaining performance obligation (CC cRPO) growth accelerating to 10.5%, primarily due to early renewals. This growth exceeded the analyst’s expectations by 110 basis points and was consistent with their preview.
Salesforce’s guidance for fiscal year 2026 indicates a constant currency subscription revenue growth of approximately 9%, which is slightly higher than Scotiabank’s forecast of over 8.5% but falls short of the consensus estimate of 9.5%. This projection aligns with the company’s current revenue growth rate of 9.53% over the last twelve months, as reported by InvestingPro, which offers comprehensive financial metrics and 12 additional exclusive insights about Salesforce’s performance. Verkhovski noted that the consensus figure was an unrealistic expectation. The company’s Data Cloud and AI annual recurring revenue (ARR) has seen a significant year-over-year increase of 120%, reaching $900 million. Agentforce, a product of Salesforce, now boasts over 3,000 paid customers, and all of Salesforce’s top 10 wins have included Data and AI components.
Despite the expectation that Agentforce will only contribute modestly to revenue this year, its momentum is predicted to build, leading to a more substantial impact in fiscal year 2027. Salesforce has also projected a 100 basis point non-GAAP operating margin expansion to 34%. The company plans to repurpose thousands of support agents, refrain from hiring new engineers this year, which is expected to result in a 30% productivity increase, and potentially expand its sales organization by 10-20%.
Further insights into Agentforce trends, as well as other Salesforce products like Tableau Next (LON:NXT) and a new ITSM product, are expected to be shared at the upcoming Trailhead DX event, scheduled for March 5-6th in San Francisco. Verkhovski concluded by saying that with shares currently trading at 18 times the calendar year 2026 estimated enterprise value to free cash flow (EV/FCF) after hours, it is a good time to buy. The revised price target of $400 is based on a 25 times multiple of the calendar year 2026 estimated EV/FCF. Currently trading at a P/E ratio of 50x and an EV/EBITDA of 30.5x, InvestingPro’s Fair Value analysis suggests Salesforce is slightly undervalued. For deeper insights, investors can access the comprehensive Pro Research Report, available exclusively to subscribers, which provides detailed analysis of Salesforce’s valuation metrics and growth potential.
In other recent news, Salesforce.com has reported its fourth-quarter fiscal year 2025 results, with revenue performance aligning with expectations when adjusted for currency fluctuations and exceeding profit estimates due to increased operational efficiency. The company’s Current Remaining Performance Obligation (CRPO) growth reached 11% in constant currency, surpassing the forecast of 9%, driven by stability in certain cloud services and early renewals. Salesforce’s product Agentforce has gained traction, securing over 3,000 paid deals in the quarter, while its Data Cloud and Artificial Intelligence Annual Recurring Revenue (ARR) saw an impressive year-over-year growth of approximately 120%, reaching close to $900 million. Despite these achievements, Salesforce’s fiscal year 2026 guidance fell short of market expectations, partly due to a recent change in the company’s Chief Financial Officer. Analysts have varied outlooks on Salesforce’s stock, with KeyBanc maintaining an Overweight rating and a $440 price target, while Raymond (NSE:RYMD) James adjusted its price target to $375 but kept a Strong Buy rating. DA Davidson lowered its price target to $275, retaining a Neutral rating, citing challenges in the professional service and marketing + commerce cloud segments. Evercore ISI maintained an Outperform rating with a $420 price target, noting that Salesforce’s EPS of $2.78 surpassed projections and highlighting potential revenue acceleration in the second quarter. The company anticipates operating margins to improve throughout the year, supported by efficiencies from Agentforce.
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