On Monday, Goldman Sachs reiterated its Buy rating on Salesforce.com (NYSE:CRM) with a price target of $345.00, maintaining a positive outlook ahead of the company's first-quarter earnings for fiscal year 2025, expected on May 29.
The investment firm anticipates an 11% year-over-year increase in revenue and a 10% rise in calculated remaining performance obligations (cRPO). The forecast includes non-GAAP operating margins of 32%, which aligns with market expectations, and non-GAAP earnings per share (EPS) of $2.29, slightly above the consensus of $2.24.
The firm's confidence in these estimates is based on Salesforce's management's reliance on strong execution rather than an improvement in the economic environment or a rebound in small and medium-sized business (SMB) spending.
Analysts note that, although other companies have reported continued quarter-over-quarter softness in these areas, the first quarter is typically less significant and unlikely to significantly impact Salesforce's trajectory toward achieving more than 10% subscription revenue growth in FY25.
Investors are expected to focus on the potential for disruptive mergers and acquisitions (M&A) and the outline of calendar year 2024's revenue growth. However, Salesforce management has expressed a commitment to the discipline regarding the financial impact of future deals, emphasizing that any potential acquisitions would likely contribute to growth and margins swiftly.
Following Salesforce's TrailblazerDX conference, expectations are for continued strong demand for its Data Cloud, with a likely increase in the pipeline from the event. Goldman Sachs left the conference with a reinforced belief in Salesforce's ability to deliver on its product roadmap and enhance offerings through artificial intelligence (AI).
The firm concludes that Salesforce's stock presents a balanced opportunity for growth, margin expansion, and capital return, with the potential to generate $15-16 in free cash flow per share in FY27.
InvestingPro Insights
As Salesforce.com (NYSE:CRM) prepares to reveal its first-quarter earnings, real-time data from InvestingPro paints a comprehensive picture of the company's financial health. With a robust market capitalization of $277.04 billion and a significant year-over-year revenue growth of 11.18%, Salesforce's financial stability is evident. The company's P/E ratio stands at 67.35, reflecting its high earnings multiple, a point echoed by one of the InvestingPro Tips which notes that CRM is trading at a high earnings multiple. This valuation is supported by Salesforce's position as a prominent player in the Software industry, another InvestingPro Tip that aligns with Goldman Sachs' optimistic outlook.
Investors may also find reassurance in the company's ability to cover interest payments with its cash flows and moderate level of debt, as highlighted in the InvestingPro Tips. Moreover, Salesforce's profitability over the last twelve months and the substantial price uptick of 27.03% over the last six months are key indicators of its strong market performance. With 11 additional InvestingPro Tips available, investors can gain deeper insights into Salesforce's potential. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription and explore these valuable tips.
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