Salesforce shares jump on strong results amid tough economy

Marc Benioff, CEO of Salesforce, at WEF in Davos, Switzerland on May 25, 2022.

Adam Galica | CNBC

Sales force shares surged as much as 15% on Wednesday, after the cloud software maker released quarterly results and raised its full-year profit forecast.

On a day when most tech stocks and the broader stock market trade lower, investors are optimistic about Salesforce’s ability to withstand rising interest rates, inflation, supply shortages and the ongoing disruption from Covid-19.

“Despite nothing outstanding for the quarter, we believe investors are relieved by the consistent revenue and positive comments on conditions and are pleased with the increase in profit margins for the fiscal year.” lead to stock gains in the aftermarket,” Bernstein and Firoz Valliji analysts Mark Moerdler wrote in a note to clients on Wednesday.

However, Moerdler and Valliji, who have comparable ratings to the stock, cut their 12-month price target to $181 from $230. Shares were trading at a high of $184.42 on Wednesday.

Analysts said the target shift was a matter of giving estimates “multiple compression fits on software,” as worries grow about slowing growth in cloud computing and software. Generally speaking.

Revenue for the quarter rose 24% to $7.41 billion, topping analyst median estimates of $7.38, according to Refinitiv. Salesforce reduced its revenue guidance for the full fiscal year 2023 while still boosting its profit view. The company now has $4.74 to $4.76 per share in adjusted earnings and $31.7 billion to $31.8 billion in revenue. Salesforce previously expected earnings of $4.62 to $4.64 per share on revenue of $32.0 billion to $32.1 billion.

Analysts at Evercore focus on 18% growth in Salesforce’s legacy Sales Cloud business for tracking sales. They cite comments from Gavin Patterson, the company’s president, who said at Davos that Salesforce is more important to customers than in previous cycles.

“We believe this speaks to demand cohesion even amid a more uneven macro backdrop,” the analysts, who have comparable buy ratings to the stock, wrote. They have maintained their $250 price target.

Analysts at Piper Sandler reduced their share price target to $250 from $330, but said they were encouraged when they heard Patterson say on Tuesday that the number of trades involved five or more clouds. Salesforce’s was up 21% from a year earlier.

“Suppliers consolidation could fall into CRM hands if business conditions tighten,” said Piper Sandler analysts, whose buy rating equates to a buy rating on the stock. again. “Last week, we spoke with a CFO who now plans to take a closer look at the number of IT vendors with the intention of moving from the existing service cloud to the Sales and Service Cloud. Salesforce in the future as part of a plan to streamline costs after minor layoffs. Multi-cloud could help insulate the model next year.”

CLOCK: Evercore ISI’s Materne says spending on enterprise software is solid.

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