Salesforce aims to reach $50 billion in revenue

22.09.2022 15:57|Conotoxia Ltd Analyst Team

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The Salesforce company is based in California, USA, where it was founded in 1999. It is one of the leading developers of software for customer service and support and sales (CRM - Customer Relationship Management). The company's shares are listed on the NYSE under the ticker CRM.

The company's share price as recently as 2008, after the global financial crisis, cost about $7. At the peak of the bull market that was emerging after the epidemic hit the financial markets, CRM's share price rose to more than $300 in November 2021. Since then, as well as the entire broad index in the US, there may have been a bull market, which brought the share price down to $147.63 at the close of trading on Sept. 21, 2022. Since the beginning of the year alone, Salesforce's share price has fallen 42 percent.

salesforce stock chart

Source: Conotoxia MT5, Salesforce CFD, W1

Salesforce financial results

The company performed well during the pandemic when there was strong demand for cloud solutions due to the shutdown of economies and the transition of consumers and stores to the internet. In 2018, net income was $360 million, while in 2021 it was already $4 billion. However, recent quarterly data seems to indicate that 2022 could be much worse than the previous year, which could also be reflected in the share price. Earnings per share (EPS) for the quarter ended July 31, 2022 were $0.07, down 87.5 percent year over year. Salesforce's EPS for the twelve months ended July 31, 2022 was $0.52, down 79.03 percent year-over-year. However, the company now has plans to improve its financial performance.

Salesforce hoping to double revenue

Salesforce recently reaffirmed its target for fiscal year 2026 (the U.S. FY begins October 1 and ends September 30) of $50 billion in revenue. In FY22, CRM revenues totaled $26.492 billion, an increase of 24.66 percent over the 2021 result. In FY20, on the other hand, revenues amounted to $17.09 billion. The company   is hoping to double its existing revenues over four years, which may be met with more enthusiasm from investors. Below are Wall Street opinions quoted by Bloomberg  on plans to raise margins.

Piper Sandler with an Overweight recommendation and a $200 price target:

Management presents a clearer financial plan to drive profitable growth at scale, clarity on path to 25% operating margin in FY26 reinforces a bullish scenario. Risk and reward appears increasingly favorable for the stock after a 42% decline this year.

Oppenheimer with a price target of $240:

Margin forecast and management commentary should alleviate concerns about growth trajectory, cash utilization and sustainability of margin expansion. Management's tone was "clearly optimistic," current business momentum is healthy, despite currency difficulties and macroeconomic risks.

Morgan Stanley with a target price of $273:

The operating margin target for FY26 is higher than Wall Street's estimate of 24.6 percent, with management detailing key sources of leverage, in particular a target of dropping sales and marketing expenses below 35 percent of revenue, accelerating the pace of innovation on the product side with the launch of Salesforce Genie, a new real-time data platform, and updates to Slack.

Truist Securities with a target price of $240:

We are positive on the company after providing additional information on growth drivers to achieve its FY26 revenue target, commitment to profitability and shareholder return.

 

Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service)

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

 

 

 
 

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