Salesforce stock slightly dropped to 152.00 in premarket trading Tuesday.
Salesforce Stock (NYSE:CRM)
Wall Street and the majority of the tech sector are focused on both this weeks Fed meeting and Dreamforce, a three-day spectacle held annually by Salesforce (NYSE:CRM).
The 20th Dreamforce, an event featuring well-known speakers and the software kings staff and partners, gets underway this week at the Moscone Center in San Francisco, which is Salesforces backyard. According to data that Salesforce provided to Yahoo Finance, 10,000 employees and more than 100 CEOs will be there. There will be around 40,000 attendees in person.
Al Gore, the former vice president; Bret Taylor, the co-CEO of Salesforce; and Marc Benioff are among the featured speakers. A number of significant interviews will be included in Yahoo Finances mid-week broadcast from the event. The extravaganza will also include Salesforces important investor day on September 21.
Since tech giants have recently issued warnings about a slowdown in transaction activity due to economic uncertainty, Wall Street is closely monitoring the event. In the last six months, Salesforce stock has decreased by 26%, which is a reflection of some of this macro-uncertainty. Over the same period, the Dow has fallen by 9.5%.
Tech analyst Brent Thill of Jefferies said he is expecting Salesforce to give an update on its long-term projections, particularly hitting $50 billion in revenue by fiscal year-end, in a fresh note to clients.
Observations from Thills pre-Salesforce investor day note are provided below.
- Price Objective: $250
- Score: Buy (reiterated)
- Assumed change in stock price: +65%.
The environment for the software business has gotten softer recently. The Salesforce, Braze, and Adobe print this quarter show that the need for front office software is under pressure. This is a result of both economic headwinds and a pull-forward in demand during the pandemic. Since we started conducting it in the fiscal year 2015, our partner survey has been the third most unfavorable (the other two at the start of the pandemic). The current print was affected by compressed deals, longer approval processes, and more measured buying behavior, according to management. Because Dreamforce is taking place early and the situation is more challenging than it was last year, we do not anticipate Salesforce to issue a top-line forecast for the fiscal year 2024.
With regard to medium-term guidance, Salesforce (NYSE:CRM) could adopt a slightly more conservative stance. According to Thill, management mapped out a route to $50 billion in revenue by the fiscal year 2025, translating to a 17% CAGR [compound annual growth] from the fiscal year 2022 guidance then. Although we continue to be optimistic about the secular tailwinds supporting front office digital transformation, we think that Salesforces medium-term goals will be hampered by the short-term macroeconomic and foreign exchange headwinds. Therefore, we are assuming a $48 billion total revenue in the fiscal year 2026, which is a 16% 4-year CAGR.
Focus is placed on profit margins.
The Street is at 25% compared to 20.4% in the fiscal year 2023, so Thill said, We expect Salesforce to announce the fiscal year 2026 margin target. Additionally, we anticipate receiving a preliminary estimate of margins for the fiscal year 2024 (Street at 21.6%). As Salesforce is behind large-cap peers with mid-to-high-30s margins, we think CFO Amy Weaver is committed to achieving greater margins.
A buyback is imminent.
Remember that Salesforce recently announced its first-ever $10 billion buyback? Thill wrote. Investors have inquired about the anticipated execution schedule for the repurchase.
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