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As we approach earnings season, Salesforce (NYSE:CRM) is at the forefront of investor discussions. With its upcoming earnings report set to be released tomorrow after market close, many are asking: What should we expect? And more importantly, is Salesforce stock a buy or sell right now?
Salesforce, a leader in customer relationship management (CRM) software, recently missed analysts’ revenue expectations by a narrow margin, reporting $9.99 billion in revenues, which reflects a year-on-year growth of 7.6%. Despite that growth, the company’s earnings per share (EPS) guidance for the next quarter fell short of analysts’ expectations. This trend has raised questions regarding the stability of Salesforce's revenue stream as it heads into earnings.
This quarter, analysts anticipate Salesforce will report a revenue growth of 6.8% year-on-year, reaching approximately $9.75 billion. While still a solid number, this indicates a slowdown compared to the 10.7% increase recorded in the same quarter last year. Adjusted earnings are projected at $2.55 per share. Analysts have largely maintained their revenue estimates in the past month, indicating a level of confidence despite the recent misses. Notably, Salesforce has struggled in meeting Wall Street's revenue expectations twice within the last two years.
To gauge how Salesforce might perform, we can look at its peers in the sales software sector. For instance, Freshworks recently reported an impressive year-on-year revenue growth of 18.9%, surpassing analysts’ expectations by 2.1%, while HubSpot also beat estimates with a 15.7% increase in revenues. Following these reports, Freshworks’ shares saw a 2.9% increase whereas HubSpot fell 8.8%. This data provides insight into the competitive landscape Salesforce is navigating.
Investor sentiment in the sales software segment has generally been positive, with the average share prices of competitors up 9.4% over the past month. Salesforce’s shares have followed suit, rising 4.4% during the same timeframe, but still lag behind competitors in terms of overall growth. Currently, Salesforce carries a consensus analyst price target of $363.95, compared to its current share price of $277.40, indicating potential upside for investors.
Looking ahead, the rise of generative AI is proving to be pivotal for large corporations, and Salesforce is no exception. Analysts have noted strong momentum for Salesforce's AI offering, Agentforce, which could be a critical factor in the company's growth trajectory. Most analysts tracked by Visible Alpha suggest investors buy or hold Salesforce stock, with 18 out of 23 analysts recommending it as a buy or equivalent. Their collective price target averages around $361, suggesting a promising 31% upside from current levels.
However, there is caution amid the optimism. While Oppenheimer sees Salesforce as a robust long-term growth story, other analysts have adopted a more wait-and-see approach regarding Agentforce, adjusting their recommendations based on forthcoming data. For instance, Citi lowered its price target to $320, whereas Deutsche Bank remains bullish with a target of $400, and Jefferies holds firm at $375.
In conclusion, as Salesforce gears up for its earnings announcement, the mix of growing AI capabilities and ongoing revenue concerns presents both opportunities and risks for investors. With a competitive market landscape and fluctuating analyst opinions, it’s essential to consider both short-term performance and long-term potential.
Will you invest in Salesforce (CRM) ahead of earnings? Whether you’re a seasoned investor or new to the market, now is a crucial time to evaluate your position in this influential technology company.
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