Salesforce Stock Soars 4% Following Price Increase Announcement

Salesforce (NYSE:CRM) shares fell more than 15% in pre-market today after the company reported guidance for the current quarter that fell significantly short of analyst expectations, overshadowing its fiscal first-quarter earnings, which had surpassed Wall Street forecasts.

For the fiscal second quarter, Salesforce expects adjusted EPS to be between $2.44 and $2.36, with revenue ranging from $9.20 billion to $9.25 billion, both below Wall Street estimates of $2.40 EPS and $9.34 billion in revenue.

For Q1, Salesforce posted an adjusted EPS of $2.44 on revenue of $9.13 billion, compared to the analysts' predictions of $2.37 EPS on $9.15 billion in revenue. Subscription and support revenues for the quarter were $8.59 billion, marking a 12% increase year-over-year. Professional services and other revenues reached $600 million, a 3% year-over-year increase.

For the full fiscal year 2024, Salesforce maintained its revenue guidance between $37.7 billion and $38.0 billion and adjusted earnings per share in the range of $9.86 to $9.94.

Salesforce Inc (NYSE:CRM), a leading provider of cloud-based solutions, is gearing up for its quarterly earnings release on Wednesday, May 29, 2024. The company, known for its innovative AI-powered cloud solutions, plays a significant role in the digital transformation efforts of businesses worldwide. Despite facing a challenging macroeconomic environment that has seen a reduction in software spending by small and medium-sized enterprises, Salesforce is expected to showcase a strong financial performance. Wall Street analysts have set high expectations for the company, forecasting an earnings per share (EPS) of $2.38 and anticipating revenue to reach approximately $9.15 billion for the quarter.

The anticipated growth in Salesforce's revenue, expected to exceed 10% year-over-year, underscores the company's resilience and the increasing demand for its services. This demand is largely fueled by businesses continuing to migrate to the cloud and embrace digital transformation, even amidst economic uncertainties. The company's ability to attract and retain customers seeking to leverage AI for business efficiency has been a key driver of its success. Salesforce's focus on delivering cutting-edge cloud solutions has positioned it well to capitalize on these market trends, as highlighted by Proactive Investors.

Analysts from Zacks Investment Research have echoed this positive outlook, noting that Salesforce's Q1 performance is likely to benefit significantly from ongoing digitalization initiatives. The forecasted earnings of $2.38 per share represent a substantial year-over-year increase of 40.8%, while the expected revenue of $9.14 billion marks a growth of 10.8% compared to the same quarter in the previous year. These projections have remained stable over the last 30 days, indicating a strong consensus among analysts about the company's potential to outperform.

The stability in earnings estimates is particularly noteworthy, as it reflects analysts' confidence in Salesforce's ability to meet or exceed expectations. This consistency is crucial for investors, as fluctuations in earnings projections can lead to volatility in the stock's price. Historical data has shown a strong correlation between the accuracy of earnings forecasts and the stock's performance, making these estimates a key factor for investors as they assess the company's financial health and growth prospects.

As Salesforce prepares to unveil its financial results, the market's attention will be focused on whether the company can deliver on these high expectations. The anticipated increase in revenue and earnings highlights the company's strength in navigating a complex business landscape, driven by its innovative cloud solutions and strategic focus on digital transformation. With analysts projecting significant growth, Salesforce's upcoming earnings report will be a critical indicator of its current performance and future potential in the competitive cloud computing market.

Salesforce (NYSE:CRM) shares rose nearly 3% intra-day today after the company announced optimistic guidance and surpassed expectations with its fourth-quarter earnings, driven by increased spending in the enterprise sector. This positive momentum has led the cloud software company to declare its inaugural quarterly dividend and enhance its stock repurchase program.

In Q4, Salesforce saw its adjusted earnings rise to $2.29 per diluted share from $1.68 in the previous year, with revenue climbing to $9.29 billion from $8.38 billion. These figures exceeded analyst predictions of $2.27 earnings per share on $9.22 billion in revenue.

For the upcoming Q1, Salesforce anticipates adjusted earnings per share between $2.37 and $2.39, with revenue projections ranging from $9.12 billion to $9.17 billion. These forecasts outpace Wall Street expectations of $2.2 earnings per share on $9.14 billion in revenue.

For the entire fiscal year, the company projects adjusted earnings per share to be between $9.68 and $9.76, with revenue estimated to be in the range of $37.7 billion to $38.0 billion.

Salesforce initiated its first-ever quarterly dividend of $0.40 per share and has expanded its share buyback program by an additional $10 billion.

Analysts at Morgan Stanley upgraded Salesforce (NYSE:CRM) shares from Equal-Weight to Overweight and raised the price target by $60 to $350 per share.

The bank cited low investor expectations versus potential revenue growth drivers as key reasons for this upgrade. The analysts pointed out that these drivers include price increases, product bundling, and adoption of the Data Cloud, all contributing to an attractive risk/reward profile for Salesforce.

They also noted Salesforce's significant outperformance in 2023 compared to its large-cap software peers, attributing this to a substantial improvement in the company's profitability outlook. Specifically, the analysts highlighted an over 800 basis points year-over-year expansion in operating margin.

While much of the recent margin growth is believed to be behind, Morgan Stanley identified several factors that could lead to potential top-line growth, exceeding the conservative expectations of investors. These factors are the effective implementation of recent price hikes, new bundled solutions enhancing the sales process, and the Data Cloud service, which helps customers leverage their data for Generative AI applications.

Citi analysts updated their price target for Salesforce (NYSE:CRM), increasing it from $229 to $247 per share, while maintaining a Neutral rating on the stock.

The analysts communicated to investors that the approach to Salesforce's Q3 earnings is marked by a balanced perspective on the company's prospects for growth and margins. They referenced discussions with partners that echoed similar sentiments as previous quarters, highlighting challenges in renewals and new business acquisitions. Notably, one partner observed minimal or no new net product adoption, and there was a general consensus about pushback from customers against Salesforce's assertive pricing during renewals.

The decision to keep a Neutral rating on Salesforce's stock is driven by the belief that the company's margin expansion has largely reached its peak and that growth might slow down, potentially settling into the high single digits by fiscal 2025.

Salesforce.com (NYSE:CRM) shares gained more than 4% intra-day today after the company announced a 9% price increase across various products.

Evercore ISI reiterated an Outperform rating and a price target of $240.00 on the company, highlighting that this is the first price hike in seven years for Salesforce, during which the company has made significant investments of over $20 billion in research and development and introduced 22 software releases with numerous features. This includes recent additions such as the AI Cloud and 'GPT' capabilities across its clouds.

The analysts believe that while some customers may express dissatisfaction with the price increase, considering the seven-year interval, a 9% increase seems reasonable. The analysts expect these price actions to provide positive momentum for Salesforce in the second half of 2024 and the first half of 2025.