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BofA Securities has updated its outlook on Salesforce.com (NYSE: CRM), increasing the price target from $288.00 to $316.00. The firm sustained its Buy rating on the stock, citing strong future free cash flow (FCF) growth projections for the company.
Salesforce's growth is expected to decelerate to 9% in the fiscal year 2025 from 11%, but the company is anticipated to achieve a robust 25% FCF growth for the same period. The projection is supported by a 22.5% operating cash flow growth guideline. The company's ongoing improvements in sales and marketing productivity could potentially lead to an additional 500 to 800 basis points of expansion.
The analyst from BofA Securities highlighted that, while immediate low to mid-teens top-line growth may not be achievable, there is potential for sustained mid to high-teens FCF growth over time.
The revised price target of $316 is based on a 22 times multiple of the company's estimated fiscal year 2025 FCF, which represents an increase from the previous multiple of 16 times.
Recently, Salesforce.com Inc (NYSE:CRM). and Workday (NASDAQ:WDAY), Inc. partnered to launch an artificial intelligence (AI) employee service agent. The collaboration will integrate Salesforce's Agentforce Platform and Einstein AI with Workday's platform and Workday AI to create AI agents that can assist with various employee service use cases. The partnership aims to enhance productivity and efficiency by allowing the AI agent to recommend and act across both platforms on behalf of the employee.
InvestingPro Insights
As Salesforce.com (NYSE:CRM) garners a positive outlook from BofA Securities, real-time data and InvestingPro Tips further enrich the narrative of the company's financial health and market position. A perfect Piotroski Score of 9 underscores the robust financial state of Salesforce, indicating strong operational efficiency and fiscal health. Additionally, the company's impressive gross profit margins, which stand at 76.0% as of the last twelve months leading up to Q1 2025, align with the analyst's expectations of strong future free cash flow growth.
InvestingPro Data shows a market capitalization of $254.64 billion, with a forward P/E Ratio of 43.82, suggesting that the market has high expectations of Salesforce's earnings potential. Furthermore, the company's revenue has grown by 11.04% over the last twelve months as of Q1 2025, supporting the analyst's projections of sustained growth. With a fair value estimate by InvestingPro at $295.13, slightly below the BofA Securities target, investors are offered a comprehensive view that balances market optimism with financial analytics.
For those looking to delve deeper into Salesforce's potential, InvestingPro offers additional insights, including the company's ability to sufficiently cover its interest payments with cash flows and its moderate level of debt, which could be critical factors for long-term investment considerations. To explore more about Salesforce's financial metrics and for further InvestingPro Tips, visit https://www.investing.com/pro/CRM. In total, there are 11 additional tips listed on InvestingPro for Salesforce, providing a wealth of information for investors.
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