Shares in Salesforce popped on fourth-quarter earnings that topped views while revenue guidance for CRM stock came in above expectations. Salesforce also said it has disbanded a panel that explores mergers and acquisitions, implying it will make no more big acquisitions, amid growing pressure from activist investors.
The enterprise software maker reported fourth-quarter earnings after the market close on Wednesday. Also, Salesforce announced a bigger buyback for CRM stock.
For the quarter ended Jan. 31, Salesforce earnings rose 100% to $1.68 per share on an adjusted basis amid cost-cutting and one-time items. San Francisco-based Salesforce said revenue climbed 14% to $8.38 billion, boosted by improved results at the MuleSoft business.
Salesforce Stock: Improved Margins
CRM stock analysts expected Salesforce to report earnings of $1.37 a share on sales of $8 billion. A year earlier, Salesforce reported profit of 84 cents a share on sales of $7.33 billion.
Salesforce predicted fiscal 2024 operating margins of 27%, above analyst estimates of 23%.
"Margin improvement will be helped by better-than-expected growth over the next 12 to 24 months, as well as heightened focus on sales and marketing and general and administrative efficiency," BMO Capital Markets analyst Keith Bachman said in a note to clients.
He added: "Salesforce discussed 30%-plus margins as early as the April quarter in fiscal 2025 and then higher aspirations longer-term. We think this was in the realm of investor expectations eventually, but sooner than expected and represents enough upside to generate continued interest in the CRM stock story."
Salesforce stock jumped 12.3% to 187.85 in afternoon trading on the stock market today.
New Buyback For CRM Stock
Salesforce also announced a new $20 billion buyback for CRM stock. The company approved a $10 billion buyback in 2022, before activist investors surfaced. Those activist investors include Elliott Management, Starboard Value, Third Point, ValueAct Capital and Inclusive Capital. The group has been pressuring management to improve profit margins and free cash flow.
For the current April quarter, Salesforce said it expects revenue of $8.17 billion, topping estimates of $8.04 billion. For full-year fiscal 2024, Salesforce forecast revenue of $34.6 billion, topping estimates of $33.89 billion.
Prior to the Salesforce earnings release, CRM stock had advanced about 24% in 2023. Shares retreated nearly 48% in 2022.
Potential Proxy Fight Ahead?
Analysts say a potential proxy fight with activist investors looms heading into the company's annual shareholder meeting.
Salesforce sells software under a subscription model. Its software helps businesses organize and handle sales operations and customer relationships. The company has expanded into marketing, customer services and e-commerce.
CRM stock owns a Relative Strength Rating of 61 out of a best-possible 99, according to IBD Stock Checkup.
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