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Anusuya Lahiri

Analysts Continue To See Upside In Salesforce Post Q2 Beat Despite Challenging Macros

  • Salesforce, Inc (NYSE:CRMclocked 22% revenue growth to $7.72 billion in Q2, beating consensus. The EPS of $1.19 topped the consensus. 
  • The board approved a buyback of up to $10 billion. 
  • The Q3 and FY guidance were below the consensus.
  • Mizuho analyst Gregg Moskowitz reiterated a Buy and cut the price target from $245 to $235.
  • He cheered the upbeat Q2 while disappointed with the guidance due to macro challenges. 
  • Notwithstanding the macro challenges, he reiterates that CRM remains very well-situated to help its vast customer base manage revenue and process optimization via digital transformation. 
  • BMO Capital analyst Keith Bachman reaffirmed Salesforce with an Outperform and slashed the price target from $223 to $207.
  • He had lowered his growth forecasts before the report, which were better than the company's guidance. 
  • Piper Sandler analyst Brent Bracelin maintained an Overweight and lowered the price target from $220 to $200.
  • Mixed Q2 results with FX headwinds, considerable deal delays, and compression of deal sizes contributed to guidance, which was well below his estimate. 
  • That said, leadership remains committed to driving margin expansion and unveiled the first buyback since the 2004 IPO. 
  • He reduced estimates on what appears to be a kitchen-sink guide, factoring in many of the near-term challenges.
  • Scott Berg from Needham maintained a Hold.
  • He acknowledged the dismal guidance due to macro pressures weighing more on EU and North American sales cycles than previously assumed. 
  • The analyst noted that CRM's buyback was it's first of any kind.
  • Raymond James analyst Brian Peterson maintained a Strong Buy and cut the price target from $250 to $225. 
  • The re-rating followed Q2 results offering mixed fundamentals, with the company referencing some extension to sales cycles. 
  • Overall growth was not void of positive news and also included further evidence of margin expansion momentum and the share repurchase program. 
  • Morgan Stanley analyst Keith Weiss reiterated an Overweight and price target of $273.
  • A large cut to FY23 revenue targets likely spurs investor debate on Salesforce's growth potential.
  • But the analyst views this more as a de-risking of the outlook in response to a weakening macro, while more fundamental initiatives around margins and capital allocation improve the longer-term FCF story. 
  • RBC Capital analyst Rishi Jaluria reiterated Outperform and the price target of $235.
  • Salesforce delivered subdued results driven by more pronounced macro headwinds, leading shares down ~7% after hours. 
  • Management noted that macro impacts showed up in July, resulting in longer sales cycles, more approval layers, and deal compression, which the disappointing guide reflected. 
  • That said, the positive long-term takeaways were a reaffirmed focus on margins and the buyback, which suggests that large-scale M&A is likely on the back burner for now. 
  • JMP analyst Patrick Walravens reiterated a Market Outperform and a $250 price target.
  • The re-rating reflected better-than-expected Q2 results despite deals taking longer to close, particularly in July.
  • Price Action: CRM shares traded lower by 5.69% at $169.76 on the last check Thursday.
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