Marc Benioff, co-founder and CEO of Salesforce, speaks at a luncheon at the Washington Economic Club in Washington, DC, on October 18, 2019.
Nicholas Kam | AFP| Getty Images
Sales force shares rose 12% on Thursday and headed for their biggest one-day rally since August 2020, after the cloud software vendor issued earnings and guidance that upset analysts’ estimates.
The results show that the company, led by co-founder Marc Benioff, is making concessions to activist investors who have raised stakes in the business and have raised concerns in the past. brief about the company’s revenue and income performance.
After the end of regular trading on Wednesday, Salesforce reported fiscal fourth-quarter earnings of $1.68 per share, 23% higher than the consensus among analysts surveyed by Refinitiv. Its earnings forecast for fiscal year 2024 was 22% higher than expected.
Additionally, chief financial officer Amy Weaver told analysts on a conference call that Salesforce sees an adjusted operating margin of 27% for fiscal year 2024, putting the company two years ahead of schedule. the record with their profit development.
Along with the earnings report, Salesforce said it is working with Bain on a business review, and the company announced the elimination of the board’s committee on mergers and acquisitions. That prompted a proposal from well-known activist Elliott Management, which announced a stake in the company in January.
Campaigners have been pressuring Benioff to strengthen margins as revenue growth slows and the company expects to suffer from high-priced acquisitions such as Tableau and Slack.
“These steps are consistent with our recommendations, and we believe they will help restore value at Salesforce,” Elliott’s Jesse Cohn and Jason Genrich said in a statement.
Salesforce also beat fourth-quarter revenue, reporting 14% year-over-year growth to $8.38 billion, topping the average analyst estimate of $7.99 billion, according to Refinitiv.
“Wow, that’s an amazing end to the fiscal year,” Goldman Sachs analyst Kash Rangan said on Wednesday’s earnings call, before asking a question. “Congratulations to the team. Much, much, much, much better than expected. Brighter days ahead.”
Rangan, who recommends buying the stock, raised his 12-month price target for the second time in a week following the report. More than two dozen other analysts also increased their targets. The new average price target, at $213.02, is about 15% higher than where the stock was trading on Thursday.
Evercore’s Kirk Materne, one of the analysts who picked up their target, wrote, “there’s always been plenty of choice for CRM around edges, but until now, it’s been a trick, not a step action move .” Materne has a buy rating on the stock.
Needham analysts led by Scott Berg upgraded the shares to buy from hold.
“Six years on the side is a long time in our universe but here we are, upgrading CRM to Buy as we believe its FY24 profit guidance aligns better to its cost structure with its intermediate growth outlook,” they wrote.
After falling 48% last year amid the fall in the cloud software sector, Salesforce is now up 41% in 2023 and is trading at its highest level since August.
Watch: Salesforce’s earnings highlight how shocks in expectations can move markets, says Kari Firestone
