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.
The company recently announced a new long-range profitability goal which underscored CRM’s commitment toward efficient operations. It is now aiming for a 25% adjusted operating margin, including future acquisitions, for the 2026 fiscal year. Amy Weaver, CRM’s finance chief, has reiterated the $50 billion revenue target for fiscal 2026.
However, the stock is down 42.8% year-to-date and 8% over the past month. It gained 2.2% intraday to close its last trading session at $145.44.
Here are the factors that could affect CRM’s performance in the near term:
Strong Past Growth Story
CRM’s revenue has grown at a 25.8% CAGR over the past three years and a 25.5% CAGR over the past five years. Its EBITDA has grown at a 5.8% CAGR over the past three years. Its total assets and levered FCF have grown at 41.4% and 27.8% CAGRs over the same period.
Favorable Analysts Expectations
The consensus revenue estimate of $8.03 billion for the quarter ending January 2023 indicates a 9.6% year-over-year increase. Likewise, the consensus revenue estimate for the fiscal year 2023 and the fiscal year 2024 of $30.99 billion and $35.55 billion reflect improvements of 17% and 14.7% from the prior year.
Street EPS estimate for the quarter ending January 2023 of $1.35 reflects a rise of 60.7% from the prior-year quarter. EPS is expected to grow by 15.3% per annum over the next five years.
Wall Street Analysts See Significant Upside Potential
Of the 34 Wall Street analysts that have rated CRM, 29 have rated it Buy, and five have rated it Hold. The 12-month median price target of $224 indicates a 54% potential upside. The price targets range from a low of $150 to a high of $320.
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.
The stock has a Sentiment grade of B, in sync with its favorable analyst expectations.
CRM has a C grade for Stability, consistent with its five-year monthly beta of 1.10.
In the 148-stock Software – Application industry, it is ranked #32.
Click here to see the additional POWR Ratings for CRM (Growth, Value, Momentum, and Quality).
View all the top stocks in the Software – Application industry here.
Bottom Line
CRM’s ambitious targets reflect the company’s confidence in its operative capability. Moreover, the company has a solid growth record. With Wall Street analysts bullish on the stock, I think 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 Rimini Street, Inc. (RMNI), which have an overall A (Strong Buy) rating.
CRM shares were trading at $144.43 per share on Friday morning, down $1.01 (-0.69%). Year-to-date, CRM has declined -43.17%, versus a -23.15% 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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