There was a lot to like in Sales forces (RCMP) latest quarterly statement, and investors reacted accordingly. Shares trended higher in Wednesday’s session after the customer relationship management powerhouse beat revenue and profit expectations and raised its profit outlook for the year.
In the first quarter, revenue rose 24% year-on-year to $7.41 billion, versus $7.38 billion expected by Wall Street analysts. Adj. EPS of $0.98 is also above the consensus estimate of $0.94.
While the company’s second-quarter guidance fell short of Street’s expectations, investors appeared to ignore the shortfall and focus on the fact that the company raised its earnings guidance for fiscal 2023. . EPS is expected to range between $4.74 and $4.76 versus consensus at $4.66.
Assessing the quarter, Piper Sandler analyst Brent Bracelin said Sales Cloud was again “the shining star.” “This more than offset another mixed quarter for data cloud where MuleSoft’s growth moderated sharply to 9% year-on-year from 24% last quarter,” the analyst continued.
With revenue expected to be weaker than expected in the second quarter and for the year as a whole, Bracelin notes that the growth profile is “not immune to currency headwinds and an economic cycle. tightening”.
That said, Bracelin also salutes Salesforce’s “proven track record in navigating challenging environments.”
Plus, there were other things to like. Reaffirming management’s intent to deliver greater operational efficiency, operating margin improved over 260 basis points sequentially to 17.6% (vs. bracelet). This was further reaffirmed by the outlook for the year, with the company calling for higher than expected margins – 20.4% versus 20.0% – even in the face of lower annual revenue.
Bracelin sees a combination of factors that paint an encouraging picture. These include: “1) better than expected outlook, 2) reaffirmation of 20%+ margin target even on lower revenues, 3) multi-cloud dynamics and 4) exclusion of mergers and large-scale acquisitions”.
And with CRM shares down 31% year-to-date, Bracelin believes the sale has created “attractive risk-reward for a 20%+ FCF producer.”
As a result, the 5-star analyst reiterated an overweight (i.e. buy) rating on CRM, although given the “lower growth estimates” the price target is lowered by 330 $ to $250. If this figure is reached, investors are looking at one-year returns of around 42%. (To see Bracelin’s track record, Click here)
Looking at the consensus breakdown, the street is strongly behind this name. With the exception of 3 skeptics, the other 28 analyst opinions are positive, making the consensus here a strong buy. Moreover, the average price target of $241.90 leaves room for gains of 37% over the coming year. (See Salesforce inventory forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.