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Salesforce: We Remain Fans
of the Long-Term Growth Story

Value Line analysts recommend readers take a look at Salesforce (CRM). The cloud-based software company is a leading provider of on-demand customer relationship management (CRM) services, with about 56,600 employees and a market capitalization that exceeds $180 billion. It has been a component of the Dow Jones Industrial Average since 2020.

“The company began fiscal 2022 (year began February 1st) on solid footing. Strong demand for its diverse cloud product suite helped drive revenues during the April quarter, which gained 24% year over year. Meanwhile, Salesforce registered a $0.03-per-share profit.” Even though the bottom line slumped compared to the year-ago period, owing to rising operating expenses and cost of goods (COGS), the showing topped Wall Street’s expectations, note Value Line analysts.

“Salesforce will probably put in a mixed performance this year. Still, we have tacked on a dime to our earnings-per-share estimate, as we figure management’s efforts to counter rising business costs will help alleviate some of the operating pressures.

Higher revenues and reduced inflationary costs ought to drive a significant bottom-line rebound in fiscal 2023.”

CRM appears to have formed a bottom around the $160-per-share price point, asserts analyst Nichola Patrikis. We remain fans of the long-term growth story, the analyst said.

“The long-term horizon seems bright. Management is targeting $50 billion in annual revenues by 2030. Technological innovation remains a priority for many businesses, and Salesforce’s cloud portfolio will probably become increasingly relevant, which ought to boost demand as consumer spending picks up. Likewise, the recently integrated Slack acquisition seems to be another integral growth driver.

As for the stock, it holds good near-term investment appeal, despite recent market turbulence. Lackluster investor sentiment, especially for technology stocks amidst volatile macroeconomic conditions, may continue to pressure these shares. Even so, CRM holds our Highest (1) rank for Timeliness and worthwhile appreciation is estimated over the coming 18 months. On the other hand, three- to five-year capital gains potential is limited, given the recent quotation.”

Editor’s Note: Value Line offers a broad array of investment research services. For details visit www.valueline.com.

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