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The tech sector has been leading the market higher in 2023, with artificial intelligence (AI)-related companies experiencing transformative growth. Against this backdrop, enterprise software giant Salesforce (CRM) has been dominating its peers on the Dow Jones Industrial Average ($DOWI) all year long. Up nearly 89% since the start of January, Salesforce isn't just a standout among Dow members - it's also easily outpacing the powerhouse Nasdaq-100 Index ($IUXX), which has gained 44%.
The company's recent fiscal third-quarter earnings report, which topped analysts' estimates, further fueled the stock's rally. But as we head into 2024, how much higher can CRM rise? Let's take a look - featuring the Street-high forecast from none other than Goldman Sachs.
Unpacking Salesforce's Stellar Performance in 2023
Salesforce is the top AI customer relationship management (CRM) software company globally, with a market cap north of $242 billion and a client base of 150,000+ companies. They offer a killer suite of cloud-based software as a service (SaaS) solutions that handles everything from sales and marketing to customer service and analytics.
CRM was already outperforming on the charts in 2023 ahead of its late-November earnings report - but the well-received Q3 results sparked another leg higher in the stock, as evidenced by the bull gap on the chart below.
Salesforce beat earnings expectations, reporting EPS of $2.11 against the expected $2.06. Revenues hit $8.72 billion, a cool 11% YoY increase, thanks to a 13% boost in subscription & support revenues. That marks four quarters in a row CRM has bested Wall Street's earnings expectations. They also upped their full-year guidance to $35.4 billion in revenues and $5.86 per share in earnings.
Looking ahead, the consensus forecast calls for 132% EPS growth this fiscal year, followed by a much slower 21.6% growth rate in fiscal 2025. Meanwhile, projected forward revenue growth of 13% is well above the sector median.
Analysts' Bullish Predictions for Salesforce in 2024
The analyst crew, in general, is bullish on Salesforce, which has an average “moderate buy” rating. Out of the 37 analysts in the ring, 22 scream “strong buy,” 2 go for a “moderate buy,” 12 play it cool with a “hold,” and there's that one lone wolf suggesting a “strong sell.” However, given the stock's massive run, CRM has slightly outpaced its average 12-month price target of $248.74 - which represents a slight discount to current levels.
That said, Kash Rangan of Goldman Sachs thinks the rally is set to continue, and has a Street-high target of $345. That implies expected upside of 38% from here. In a note to clients following the Q3 earnings, the Goldman analyst called out Salesforce's stellar revenue growth, expected margin expansion, and potential positive impacts from price increases in the year ahead.
The Sky's the Limit for Salesforce in 2024
In conclusion, there's no particular reason to think CRM's rally has peaked here, even if Wall Street price targets may have fallen behind. Given the strong Q3 results and upbeat outlook, Salesforce looks well-positioned to expand its AI-driven dominance in cloud software well into the year ahead.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
