Salesforce, Inc. (CRM) is a customer relationship management technology provider. The company’s Customer 360 platform enables its customers to work together to deliver connected experiences.
For the fourth quarter, the company expects its revenue to come between $7.93 and $8.03 billion and non-GAAP EPS between $1.35 and $1.37. For the full year (fiscal 2023), the company estimates a revenue between $30.9 and $31 billion and non-GAAP EPS between $4.92 and $4.94.
Earlier, the company announced a new long-range profitability goal, which underscored CRM’s commitment to efficient operations. It aims for a 25% adjusted operating margin, including future acquisitions, for the 2026 fiscal year. Moreover, Amy Weaver, CRM’s finance chief, reiterated the $50 billion revenue target for fiscal 2026.
However, the stock is down 49.1% year-to-date and 15.6% over the past month. On the other hand, it has gained marginally over the past five days to close the last trading session at $129.44.
Here are the factors that could influence CRM’s performance in the near term:
Solid Financials
For the fiscal third quarter that ended October 31, CRM’s total revenues increased 14.2% year-over-year to $7.84 billion. Non-GAAP income from operations rose 30.9% from the prior-year quarter to $1.78 billion. Non-GAAP net income and non-GAAP net income per share came in at $1.40 billion and $1.40, up 9.8% and 10.2% year-over-year, respectively.
Strong Historical Growth
CRM’s revenue has grown at a 24.1% CAGR over the past three years and a 24.9% CAGR over the past five years. Its EBITDA has grown at a 1.7% CAGR over the past three years. Its total assets and levered FCF have grown at 22.5% and 21.8% CAGRs over the same period.
Favorable Analysts Expectations
The consensus EPS estimates of $1.36 for the current quarter (ending January 2023) and $1.27 for the next quarter (ending April 2023) indicate 61.9% and 29.6% year-over-year improvements, respectively. The consensus revenue estimates of $8 billion and $8.08 billion for the same quarters reflect increases of 9.2% and 9.1% from the respective prior-year periods.
Street EPS and revenue estimates for the current year (fiscal 2023) of $4.93 and $30.97 billion reflect a rise of 3.1% and 16.9% from the prior year, respectively. EPS is expected to grow by 15.4% per annum over the next five years.
Wall Street Analysts See Significant Upside Potential
Of the 35 Wall Street analysts rating CRM in the last three months, 27 have rated it Buy, and eight have rated it Hold. The 12-month median price target of $197.20 indicates a 52.4% potential upside. The price targets range from a low of $150 to a high of $300.
POWR Ratings Reflect Promising Prospects
CRM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. CRM has an A grade for Growth, in sync with its solid financial growth. The stock has a Sentiment grade of B, consistent with favorable analyst estimates.
In the 137-stock Software – Application industry, it is ranked #15.
Click here to see the additional POWR Ratings for CRM (Value, Momentum, Stability, and Quality).
View all the top stocks in the Software – Application industry here.
Bottom Line
CRM’s long-term financial targets might reassure investors about its growth prospects. Moreover, the company has a solid growth record. On top of it, CRM’s bottom line growth in the third quarter is promising. With Wall Street analysts bullish on the stock, CRM might be an ideal buy now.
How Does Salesforce, Inc. (CRM) Stack up Against Its Peers?
While CRM has an overall POWR Rating of B, one might consider looking at its industry peers, Commvault Systems, Inc. (CVLT) and eGain Corporation (EGAN), which have an overall A (Strong Buy) rating.
CRM shares fell $1.06 (-0.82%) in premarket trading Tuesday. Year-to-date, CRM has declined -49.25%, versus a -17.79% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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