Salesforce (CRM) stock forecast: Is a stock recovery in store?
One of the biggest players in the cloud-based customer relationship management (CRM) domain, Salesforce (CRM) provides solutions to bring companies and customers together through its platform. Beginning in a San Francisco apartment in 1999, Salesforce now services over 150,000 companies.
Through its digital workflows, Salesforce aids companies in managing customer information and enhances the quality of interactions. It’s powered through data and its brands Tableau, MuleSoft and Heroku.
On 3 May, Salesforce announced it had been ranked as the #1 CRM provider by the International Data Corporation (IDC) for the ninth consecutive year. Earlier this year, on 11 April, the company featured on Fortune’s 100 Best Companies to Work For list for the 14th time in a row.
The Salesforce stock market price had grown significantly during Covid-19 global lockdowns. The ability to manage teams and businesses remotely was highly sought after, leading to the CRM historical stock price all-time high of $309.96 on 8 November 2021.
However, since then the stock has fallen nearly 40% amid rising interest rates, peaking inflation and global supply chain issues. At the time of writing, CRM stock had last closed at $189.19 on 9 June.
The company released its Q1 financial results for fiscal year 2023 on 31 May, boosting investor confidence in the Salesforce share value. With $7.41bn in revenue, the company achieved a year-over-year (YoY) growth of nearly 25%.
Following a strong start in its first quarter, what does the future of this cloud-based digital advisor look like? Join us as we undertake a fundamental analysis, catch up on the latest CRM stock news and get analyst insights on Salesforce share price forecast.
Salesforce stock fundamental analysis: Q1 financial results
Salesforce quarterly financial results for fiscal 2023 ended 30 April 2022 showcased strong demand across the diverse range of industries and regions it caters to. Its top-line figure of $7.41bn was a 24.32% increase from Q1 FY 2022 figure of $5.96bn. According to data by Refinitiv, Salesforce surpassed analyst revenue expectations of $7.38bn.
Across its two broad categories of revenue generation, subscription and support, and professional services, the former contributed approximately 92% of the overall revenues. Professional services climbed up to $555m from $427m in Q1 FY 2022.
The company’s subscription and support channelcan be segregated to its sales, services, marketing and commerce, platform, and data domains. Of these, services contributed the most to the overall revenue. At $1.8bn in Salesforce service rose by nearly 20% YoY from $1.5bn. The lowest contributor remained through its data domains at $1bn.
At $4.97bn, the American markets had a YoY growth of 21%, followed by the EMEA region with a 33% increase at $1.73bn, while APAC grew by 24% to $702m.
Salesforce’s remaining performance obligation (RPO), grew by 21%. On a constant currency basis, this growth reflects a 24% YoY growth. RPO represents future revenues from future contracts that will drive revenues within the next 12 months of the company’s operating cycle.
Russia’s invasion of Ukraine in February 2022 saw the macro environment turning shaky amid global supply chain issues and rising inflation. Salesforce reported a revenue headwind of nearly $109m YoY due to adverse foreign exchange movements. However, from its core operating business, the performance remained solid, reporting $3.7bn through its operating cash flow for the quarter ended 30 April. The company showcased a 15% growth from the previous year’s $3.2bn for the same quarter.
Salesforce has continually upgraded to offer more than sales and service-related products. Through its data, marketing and commerce platforms, the company’s revenue opportunities, calculated through its total addressable market (TAM), are anticipated to grow to $284bn by 2026.
Salesforce’s bottom-line, however, remained underwhelming. Compared to the same quarter a year ago, net income fell to $28m from $469m. Using Q1 generally accepted accounting principles (GAAP) diluted earning per share (EPS) was $0.03. Non-GAAP diluted EPS of $0.98 beat the Zacks consensus analyst expectations of $0.93.
Lauding the Q1 results, Marc Benioff, Co-CEO at Salesforce said:
In its full 2023 fiscal year guidance, Salesforce lowered its revenue guidance while boosting profit expectations. Amy Weaver, the Salesforce CFO, mentioned the company’s commitment to improve its profitability over the long term through disciplined decision making.
Salesforce announced raising its fiscal 2023 non-GAAP operating margin guidance by 40 basis points to 20.4%. The company also expected its Q2 FY 23 EPS to be in the range of $1.01 to $1.02. On a revenue front, Q2 guidance lies between $7.69bn to $7.70bn.
Salesforce acquired brands continue to shine through
On 21 July 2021, Salesforce announced its acquisition of Slack Technologies, a messaging application for businesses. Arvind Krishna, chairman and CEO of IBM, which has partnered with Salesforce, commented on the acquisition:
In Q1 2023, Slack surpassed Salesforce’s expected earnings of $330m, delivering $348m in revenue. On a YoY comparison, customers spending more than $100,000 for the platform grew by 45%.
Salesforce data clouds, including MuleSoft and Tableau, have showcased 15% YoY growth. Through its AI-driven insights that helps companies see and understand their data effectively, Tableau made deals with Lookers Motor, Bose and ADT in the quarter.
Mulesoft, which was acquired by Salesforce in May 2018, builds application networks that accelerate companies’ digital transformation. In Salesgrowth’s earnings call, vice chair and Co-CEO Bret Taylor said Mulesoft has been a part of Salesforce’s largest deals in the quarter and remains a core aspect of the company’s 360 value proposition.
Boosting sales through TikTok
On 2 June, Salesforce announced its partnership with social media platform TikTok. The aim of the partnership was to have merchants on the platform find wider audiences for its products.
TikTok has been diversifying its market position from short-term video entertainment to a commercial platform. By adding shopping features to its application, the social media platform enables its approximately 1 billion monthly users to shop different brands through it.
Salesforce would help businesses tap into the TikTok user base by increasing the visibility of their products. This will facilitate merchants to launch a sales-channel within the commerce cloud on TikTok.
Scot Gillespie, general manager of Commerce Cloud, said of the partnership:
“We’ve already made great strides in helping brands leverage the power of Customer 360 to seamlessly connect with their customers on social through integrations with platforms like Facebook and Instagram, and our partnership with TikTok is the next crucial piece of the puzzle.”
CRM stock forecast for 2022 and beyond
Data compiled by Market Beat, as of 9 June, showed 40 out of 36 analysts rated the stock a ‘buy’ and four ‘hold’. The consensus analyst CRM stock price target was $272.56, with the stock projection varying from a low of $175 to a high of $375.
Algorithmic forecaster Wallet Investor predicted the Salesforce future stock price could increase to $204.62 by December 2022, closing at $303.876 and $336.981 by December 2025 and December 2026, respectively. By January 2027, 5 years from now, its Salesforce stock projection had the price in the range of $336.947 to $339.251.
According to The Motley Fool, Salesforce has the potential to grow into a trillion-dollar stock by 2030. Looking at its impressive TAM capture by 2026 and the company’s anticipation to grow at a compound annual growth rate (CAGR) of 18.7% during 2021 to 2026, it could give a tough fight to tech giant Microsoft in the years to come.
After the release of financial results, several equity analysts issued revised price targets on Salesforce’s stock performance. On 2 June, Loop Capital reiterated its hold rating and downgraded the target price to $175 from $225. Wedbush reiterated its outperform rating at a $225 price target. And Wells Fargo boosted its price target to $235 from $225 with an overweight rating.
When looking for Salesforce stock prediction, it’s important to bear in mind that analysts’ forecasts and price targets can be wrong. Analysts’ Salesforce stock analysis are based on making fundamental and technical studies of the stock’s performance. Past performance is no guarantee of future results.
Is Salesforce a good stock to buy?
Salesforce stock has fallen 25%, year to date. However, since its Q1 financial results were posted, investor sentiment seems to have boosted. The company’s acquired brands Slack, Tableau and MuleSoft have been exceeding performance expectations. Salesforce anticipates a 13% CAGR in 2022 to 2026, with respect to its total addressable market.
Whether Salesforce is a suitable investment for you will depend on your personal circumstances, investment objectives and attitude to risk. You will also need to research the stock and use this information to decide whether it meets your needs. And never invest money that you cannot afford to lose.
Why has the Salesforce stock price been going down?
Salesforce stock has taken a hit due to supply chain constraints and rising inflation. However, it has recovered over 15% of its stock value since posting strong Q1 results.
Is Salesforce a buy, sell or hold?
The consensus rating for Salesforce stock stood at ‘buy’, according to data compiled by MarketBeat, as of 9 June. However, analysts may be wrong and it’s important to make your own decision on whether you should hold the stock. Past performance is no guarantee of future success. And never invest money that you cannot afford to lose.
Will Salesforce stock go up or down?
Algorithm forecaster Wallet Investor expected the CRM stock could go up and close at $204.622 by December 2022. While The Motley Fool felt it could be a trillion-dollar stock by 2030. However, analysts’ forecasts can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.