Salesforce (CRM) Shares Plunge on Weaker Profit Guidance, Bull Thesis Remains Intact Says Analyst

December 1, 2021 7:07 AM EST
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Shares of Salesforce (NYSE: CRM) are down 7% in pre-open Wednesday after the company reported Q3 results and guidance.

Salesforce reported EPS at $1.27 to top the analyst estimate of $0.92. Revenue came in at $6.86 billion, again higher than the $6.79 billion consensus.

“We delivered another phenomenal quarter, fueling strong revenue growth, margin and cash flow. Salesforce is more relevant and strategic than ever as every company accelerates their digital transformation journey,” said Marc Benioff, Chair and CEO of Salesforce.

However, Salesforce shares were hit as the company sees EPS between $0.72 and $0.73 to miss on the Street consensus of $0.81. Sales are seen between $7.224- $7.234 billion, slightly higher than the Street consensus of $7.22 billion.

On a full-year basis, Salesforce is calling for revenue between $26.39 and $26.40 billion while reiterating its 2023 revenue guidance of $31.7 and $31.8 billion. Benioff also reiterated guidance that sees CRM hitting $50 billion in revenue in 2026.

Salesforce also announced that Bret Taylor has been promoted to Vice Chair of the Board and Co-CEO of Salesforce.

Needham & Company analyst Scott Berg described Q3 results as “solid” but said the near-term outlook is likely to keep a lid on the CRM stock.

“Management’s guidance for 4QF22 cRPO growth of just 19%.. represents a deceleration from 23% in each of the last three quarters, and we believe caused the stock to sell off after the close. Management did caution investors about 1. The MuleSoft headwinds; and 2. FX headwinds, which we believe are likely the key drivers of the expected deceleration given the positive commentary around the rest of the business,” Berg said in a client note.

Mizuho analyst Gregg Moskowitz reiterated a Buy rating on CRM but lowered the price target to $350.00 per share from the prior $360.00 as the bull thesis remains intact.

“We believe investors were generally hoping for a bit more. Revenue and operating margins showed healthy upside, while the F4Q guidance was more subdued than expected. In our view, CRM shares will likely be sluggish near-term, but we reiterate our view that the company remains very well-situated to help its vast customer base manage revenue and process optimization via digital transformation,” Moskowitz commented in a note.

Salesforce shares closed at $284.96 yesterday.

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