Citi has balanced view on Salesforce (CRM) growth/margin outlook

Citi analyst Tyler Radke raised the firm's price target on Salesforce (NYSE: CRM) to $247 from $229 per share in a note Friday, maintaining a Neutral rating on the stock.

Radke told investors that they head into CRM's FQ3 earnings with relatively balanced views on the company’s growth/margin outlook.

"Our partner conversations followed a similar theme as prior Qs, with renewal pressure and new business challenges," the analyst wrote. "One partner saw 'limited to no new net product adoption,' while across the board partners shared that customers have been pushing back on CRM’s aggressive pricing stance at renewals."

The analyst added that the firm stays Neutral-rated on the stock as they believe margin expansion has largely peaked and growth may decelerate
to the high single digits in FY25.

"We slightly lower FQ3 revenue estimates and note some small incremental FX headwinds of ~50bps. Our OPM expectations for FQ4 are more muted given the significant leverage achieved in FQ4 FY23," added Radke. "We also anticipate limited margin expansion (< 200bps) in FY25 as Salesforce may need to increase headcount to reaccelerate growth, particularly on the genAI side. Data shows that the number of job openings for Salesforce continued to tick up through 3Q."

By Sam Boughedda

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