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On Monday, Evercore ISI reiterated its Outperform rating on Salesforce.com (NYSE:CRM) with a steady price target of $300.
The firm anticipates that Salesforce will likely achieve or surpass its financial targets for the second quarter, particularly in subscription revenue and Current Remaining Performance Obligations (CRPO). However, they also forecast a possible reduction in the company's revenue and CRPO outlook for the second half of the fiscal year, citing an inconsistent macroeconomic environment.
Salesforce is trading at approximately 19 times its expected value to free cash flow, indicating that the market has already adjusted to an anticipated revenue growth rate of around 8-9% for the calendar year 2025. This adjustment sets expectations for the company's performance in the upcoming quarters.
Despite the potential for a reduced revenue forecast for the latter half of the year, Evercore ISI suggests that a slight increase in full-year operational margin guidance could bolster investor interest in Salesforce shares post-earnings announcement.
The firm also pointed out that Salesforce will encounter a challenging comparison in the third quarter's CRPO growth due to strong performance in the previous year. Therefore, seeing CRPO growth figures within the 8-9% range would align with current expectations. The overall sentiment from Evercore ISI is that while adjustments to the second-half forecasts might be necessary, the business is performing well enough to deliver robust second-quarter results.
Evercore ISI concluded that a scenario where Salesforce reports a modest beat on expectations, coupled with conservative guidance for the second half of the fiscal year, would be a positive outcome. This approach would align with investor preference for stocks with more predictable top-line estimates heading into the fall season.
In other recent news, TD Cowen also expects Salesforce.com to deliver mixed second-quarter results. Despite challenges in securing larger enterprise deals, the firm expects Salesforce.com to meet market expectations and maintain its growth guidance for fiscal year 2025. BofA Securities, on the other hand, raised its price target for Salesforce.com, while maintaining a Buy rating, citing strong future free cash flow growth projections.
In a recent development, Salesforce.com partnered with Workday (NASDAQ:WDAY), Inc. to launch an AI employee service agent. The collaboration aims to automate tasks and provide personalized support, enhancing productivity and efficiency in the workplace.
BMO Capital has maintained its positive stance on Salesforce.com, reiterating an Outperform rating and expressing confidence in the company's fiscal year 2025 revenue forecast. Salesforce.com remains a focal point for investors tracking technology and cloud-based service companies. These are the recent developments in the company's ongoing operations and strategic initiatives.
InvestingPro Insights
As Salesforce (NYSE:CRM) continues to navigate the challenges and opportunities of the current fiscal year, insights from InvestingPro offer a deeper understanding of the company's financial health and market position. With a market capitalization of $255.82 billion and revenue growth over the last twelve months at 11.04%, Salesforce demonstrates a strong presence in the market. The company's gross profit margin stands impressively at 76.0%, reinforcing Evercore ISI's confidence in Salesforce's ability to potentially surpass its financial targets.
InvestingPro Tips highlight that Salesforce has a perfect Piotroski Score of 9, indicating high financial health, and the company is recognized as a prominent player in the Software industry. These factors may contribute to the firm's optimistic outlook for Salesforce's subscription revenue and CRPO in the upcoming earnings announcement. Additionally, with Salesforce trading at a high earnings multiple (P/E Ratio of 47.02), investors are pricing in the company's future growth prospects.
For those seeking a more comprehensive analysis, InvestingPro offers additional tips on Salesforce's financial metrics and industry performance. These insights can provide valuable context for investors considering Salesforce's stock in light of Evercore ISI's Outperform rating and price target of $300, which aligns closely with the fair value estimates of $300 and $304.83 from analysts and InvestingPro, respectively.
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