CLSA Starts salesforce.com (CRM) at Hold (3)

CLSA analyst Bhavtosh Vajpayee initiates coverage on salesforce.com (NYSE: CRM) with a Hold (3) rating and a price target of $165.00.

The analyst comments: “Salesforce needs to accelerate its organic growth before investors are convinced that AI is indeed a net benefit rather than the headwind it has been thus far. We are willing to be patient rather than rush in at valuations that are still in the high teens on GAAP PE, which is what we look at, rather than the c.12x non-GAAP PE that looks alluring on the surface. To its advantage, Salesforce has vast reach into 150k customers, is vital to the sales process (a revenue generation engine that assigns it organisational potency) and has a strong AI suite with Agentforce. Our decision to wait with a Hold recommendation is predicated on our estimation that beneath the tailwinds from acquisitions and AI revenue, organic growth is still slowing and is likely at just 6% YoY. A 15x GAAP PE for FY2028CL - a steep discount to Microsoft’s target multiple of 25x but a generous one when a decade and more of earnings are being assumed - guides our target price of US$165. This methodology seems to indicate no significant upside in the stock, and therefore drives our Hold recommendation. Our rating does not question the business's moats, but rather ruminates that the stock should be cheaper.”

For an analyst ratings summary and ratings history on salesforce.com click here. For more ratings news on salesforce.com click here.

Shares of salesforce.com closed at $170.77 yesterday.

You May Also Be Interested In

• BMO Capital Starts Insmed (INSM) at Outperform
• Peoples Bancorp (PEBK) Tops Q2 EPS by 96c
• Cardinal Health to acquire AdaptHealth diabetes unit and Strive Medical for $360M