On Wednesday, Guggenheim maintained a Neutral rating on Salesforce.com (NYSE:CRM), despite the company surpassing third-quarter fiscal 2025 consensus estimates on several metrics. According to InvestingPro data, Salesforce maintains impressive financial health with a perfect Piotroski Score of 9 and robust gross margins of 76.35%.
The firm highlighted that while Salesforce exceeded expectations, including the current remaining performance obligation (cRPO), the growth was primarily driven by early renewals rather than strong new bookings. The company's earnings per share (EPS) fell short of expectations, and the fourth-quarter forecast was below analyst predictions, except for the cRPO, which the firm considers a flawed metric.
Salesforce reported an 8% revenue growth in the third quarter and is projected to maintain similar growth in the fourth quarter of fiscal 2025. The company's actual revenue growth stands at 10.26% over the last twelve months, with total revenue reaching $36.47 billion. However, analysts' expectations for fiscal year 2026 are just under 9% growth, which Guggenheim views as overly optimistic unless the company engages in further acquisitions. Salesforce's recent growth has included about 1% from acquisitions completed in November.
During the latest earnings call, the focus was on Agentforce and its market traction, which unexpectedly led to a 10% increase in Salesforce's stock price after hours. Guggenheim acknowledges Salesforce's efforts in making artificial intelligence (AI) accessible to enterprises and fostering partnerships, but remains skeptical about the prospects of this translating into significant, enduring revenue.
The firm suggests that without a clear path to substantial growth, Salesforce might be categorized as a slow-growth value stock that is currently trading above a typical value multiple.
In conclusion, while Salesforce is taking steps to integrate AI and is seeing some positive market response, Guggenheim's stance remains cautious. Trading near its 52-week high at $331.43 with a P/E ratio of 56.89, the stock's valuation metrics warrant careful consideration. The firm advises that investors should pay attention to the underlying growth drivers and potential overestimations of future performance.
For a deeper understanding of Salesforce's valuation and growth prospects, InvestingPro offers comprehensive analysis through its detailed Pro Research Report, available among 1,400+ top US stocks covered by the platform. Salesforce's current rating reflects this conservative outlook on the company's ability to sustain material revenue growth in the long term.
In other recent news, Salesforce.com has been the subject of several positive analyst reviews following robust third-quarter fiscal year 2025 results. Goldman Sachs, Evercore ISI, Raymond (NS:RYMD) James, Citi, and JMP Securities have all raised their price targets for the company, citing strong earnings, revenue growth, and promising developments in products such as Agentforce and Data Cloud. Salesforce's gross profit margins of 76.35% and year-over-year revenue growth of 10.26% were highlighted across the board, along with a perfect Piotroski Score of 9, indicating exceptional financial strength.
Analysts from Goldman Sachs and Evercore ISI have expressed confidence in Salesforce's potential to achieve significant free cash flow per share in the coming years, supported by sustained top-line growth. Raymond James and JMP Securities also noted Salesforce's strong performance in both calculated Remaining Performance Obligations (cRPO) and revenue, both exceeding consensus estimates.
Citi recognized Salesforce's solid market position and the positive industry trends that support the company's growth and financial objectives, while JMP Securities highlighted strong subscription growth and margin beat.
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