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Salesforce results: nice recovery quarter, reasonable…

Posted on by Vaseline
Salesforce results: nice recovery quarter, reasonable…

Salesforce results: nice recovery quarter, reasonable…

We’re raising our fair value estimate for Salesforce ( CRM ) to $290 (£219.78) per share from $285 after the company reported strong second-quarter results, while maintaining full-year revenue guidance and modestly raising profitability. Macroeconomic conditions continued to weigh on growth even as the company outpaced our expectations on both the top and bottom lines.

Recent trends continue, with multi-cloud deals and vertical domain sales driving relative strength versus expectations. Management was excited about the new Agentforce platform, which we believe represents a good long-term opportunity to transition from a primarily human agent pool to a primarily virtual agent pool over time. Monetization will be on a per-call basis. We still see some upside for shares, but the window has narrowed over the past three months.

We wish President and Chief Financial Officer Amy Weaver the best as she has announced she will leave the company once a successor is found, which could take six months. We have no doubt the company will attract a variety of top candidates. Weaver’s transformation of the company’s approach to both profitability and capital allocation is nothing short of remarkable.

Revenue rebounded nicely from the previous quarter’s sluggishness. Strength was evenly distributed across solutions, with multi-cloud performing well and certain verticals, such as health and life sciences or communications and media, also showing resilience. Total revenue increased 8% year-over-year (9% in constant currency) to $9.33 billion, compared to the high end of guidance of $9.25 billion. Both subscription and professional services were ahead of our model, with the former growing 9% as reported and the latter shrinking 6% year-over-year as customers continued to take on smaller projects. Current remaining performance obligations grew 10% year-over-year but slowed 210 basis points. Still, CRPO outpaced revenue, which is a positive indicator.

Key Morningstar Metrics for Salesforce

• Estimated Fair Value: $290.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Broad
• Morningstar Uncertainty Rating: High

The information contained herein is for educational and informational purposes ONLY. It is not intended to be and should not be considered a solicitation or inducement to buy or sell any security or securities mentioned herein, nor should it be considered a communication intended to persuade or induce you to buy or sell any security or securities mentioned herein. Any commentary provided is the opinion of the author and should not be considered a personalized recommendation. The information contained herein should not be the sole basis upon which any person may make an investment decision. Consult with your financial advisor before making any investment decision.

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