Analysts Positive on Salesforce's (CRM) New Mid-term Targets

September 22, 2022 5:55 AM EDT
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Price: $147.01 -2.09%

Rating Summary:
    52 Buy, 11 Hold, 1 Sell

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Shares of Salesforce (NYSE: CRM) are up about 1.5% in premarket Thursday after the company presented its new mid-term financial target at its 2022 Investor Day.

Salesforce said it targets $50 billion in revenue in FY26 (representing 17% CAGR). The target for adjusted operating margin is set at 25%+, inclusive of future M&A. Looking in the near term, CRM’s FY23 revenue guidance is set at $30.9 billion - $31 billion.

Here’s how Salesforce analysts saw the 2022 Investor Day.

Morgan Stanley’s Keith Weiss: “A quickening pace of innovation on the product side, more detailed views of large opportunities within the customer base, strong commitments to improving efficiency, and a rising focus on shareholder value point to a durable 25%+ EBIT CAGR and work to improve investor confidence in those targets.”

BMO’s Keith Bachman (lowers PT to $190): “We believe Dreamforce was a net positive highlighted by the 25+% FY26 margin target that is inclusive of any potential M&A. Management maintained the $50 billion FY26 rev target, which we think is reachable but by no means and easy target given macro and FX headwinds. Finally, we think CRM can hit the margin target even with negative revenue variance.”

Deutsche Bank’s Brad Zelnick: “We come away from Dreamforce and the company's Investor Day very comfortable with CRM as a top long idea, underpinned by our constructive partner meetings and management's firm commitment to shareholders. As for the demand environment, our field work helps validate Salesforce's massive market opportunity (updated $290bn+ CY26E TAM) and ability to capture it, though with some sobriety around the macro backdrop.”

Raymond James’ Brian Peterson: “We reiterate our Strong Buy rating on Salesforce after the company’s analyst day and Dreamforce user conference, where messaging around profitable growth should be well-received by investors.”

Piper Sandler’s Brent Bracelin: “Clarity on the path to 25% operating margins (vs. 17% 5-year average) in FY26 strengthens the bull-case scenario. Considering shares have declined by 42% YTD, the risk-reward appears increasingly favorable for CRM valued at 4x CY23E EV/S and 20x CY23E EV/FCF. Growth investors looking to rebuild positions in software should consider CRM. The company is buying stock at these depressed levels for the first time in 20+ years ($10B authorized), should you? Reiterate Overweight.”

By Senad Karaahmetovic

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Deutsche Bank, Raymond James, Morgan Stanley, Senad Karaahmetovic