October 3, 2023
Salesforce, Inc. is a prominent customer relationship management (CRM) player, offering cloud-based software services for sales, customer service, marketing, and data analytics.
Maverick Guidance:
- Salesforce (CRM) deserves a place in an Aggressive Maverick Investor Portfolio.
- The current price is $199.83, and the short-term trend is distinctly negative.
- Current Maverick Price Assessment: CRM remains a Strong Sell.
- Salesforce’s stock has consolidated since mid-July, following an impressive 48.2% increase in its share price since the beginning of the year.
- Having substantially reduced positions in 3Q2023, Mavericks are avoiding additional purchases pending a $180 price or lower, which we project in 4Q2023 into 1Q2024.
- Despite this recent pause, Salesforce is positioned favorably to outperform Dow 30 and S&P 500 companies and stocks in the next six to twelve months.
Market Guidance:
- Technical Analysis: MarketBeat = Strong Sell, TipRanks = Strong Sell.
- Consensus Analyst Ratings—MarketBeat = Moderate Buy, TipRanks = Moderate Buy.
- 36 Wall Street analysts have offered 12-month price targets for Salesforce in the last 3 months. There are 24 Buy, 11 Hold, and 1 Sell.
- The average price target is $252.88, with a one-year high forecast of $340.00 and a low forecast of $159.00.
- Dividend Yield: No dividends are paid.
Value Line Guidance:
- Company Financial Strength Rating: B++
- Share Price Safety, Market Timing, and Technical Rank:1=best. 5=worst
- Share Price Safety: 3/5
- Market Timing: 2/5
- Technical Rank: 3/5.
- Stock’s Price Stability: 60/100
- Price Growth Persistence: 90/100
- Earnings Predictability: 25/100
Revenue, Cash Flow, Earnings Quarterly Reports Overview:
Salesforce’s strong fiscal second-quarter results in July 2023 were marked by an 11% year-over-year revenue increase to $8.6 billion. This growth was primarily attributed to robust global cloud product demand. Furthermore, the company exceeded consensus expectations with $1.28 per share earnings, driven by cost-cutting initiatives that led to higher operating margins.
Quarterly revenues have seen steady growth, with the company reporting $34,750 million in annual revenues for fiscal 2023, indicating continued growth.
Annual Financial Performance:
Salesforce’s performance over the years has been commendable, with annual rates of change (per share) for revenues, cash flow, and book value showing consistent growth. Earnings have surged by 76% from 2020 to 2022.
CRM 10-Year Average Annual Return: 14.63% to October 2, 2023 (6th best of the Dow 30).
The 3-to-5-year Value Line Annual Outlook:
- Revenue Growth Potential:+7.5%
- Cash Flow Growth Potential:+7.5%
- Earnings Growth Potential:+18.0%
- Dividend Growth Potential:+0.0%
Operations and Finance Outlook:
Salesforce’s operational outlook remains positive, with expectations of solid top- and bottom-line growth in the near term. As macroeconomic conditions improve, the demand for its products is expected to rise, particularly as clients increase their IT spending.
The company’s balance sheet is in excellent condition, with substantial cash reserves and a relatively low debt-to-capital ratio. The long-term focus on AI, exemplified by the introduction of AI Cloud, positions the company well for future growth.
Strategic Developments:
CEO Marc Benioff has emphasized the potential of AI in shaping the future of business, and Salesforce appears well-positioned to leverage this trend for revenue growth. In broadening its capabilities, Salesforce acquired Airkit.ai, a company specializing in AI-powered customer service applications. While financial details of the acquisition were not disclosed, this move underscores the company’s commitment to capitalizing on the burgeoning AI market.
Conclusion:
Salesforce has demonstrated consistent growth, resilient financial performance, and strategic initiatives that align with the evolving tech landscape, especially in AI. While the recent price trend is negative, the company’s overall outlook remains promising. Aggressive Maverick Investors in Salesforce (CRM) should maintain a reduced position and wait for a more favorable entry point, as the current stock price offers only average upside potential over the next 18 months and three to five years.
10-Year Historical Price Chart:
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