Benzinga - by Anusuya Lahiri, Benzinga Editor.
Salesforce Inc (NYSE:CRM) shares are trading lower Thursday after multiple analysts slashed their price targets following the first-quarter print.
Salesforce reported first-quarter revenue of $9.13 billion, missing the analyst consensus of $9.15 billion. The adjusted EPS of $2.44 beat the analyst consensus of $2.38.
BofA Securities analyst Brad Sills reiterated a Buy rating and cut his price target from $360 to $288 on the demand environment reversion.
The analyst attributed the performance to the quarter’s weakening buying environment that the application companies faced after the short-lived fourth-quarter strength.
He acknowledged limited visibility on an improving software spending environment, casting doubt on second-quarter growth prospects.
Stifel analyst J. Parker Lane maintained a Buy with a price target of $300, down from $350.
Lane said various headwinds outweighed green shoots in Data Cloud, Industry Cloud, public sector, and financial services this quarter as the company noted a demand environment similar to the past two years.
While the macro’s current effect on the group is undoubted, the analyst continues to see Salesforce as a clear generative AI beneficiary over the coming years.
Truist Securities analyst Terry Tillman reiterated a Buy with a price target of $300, down from $360.
Salesforce had a mixed quarter. The company noted a continuation of measured buying behavior leading to longer deal cycles and deal compression but reiterated that it is seeing favorable trends with key growth levers like Data Cloud, multi-cloud adoption, and the Industry Clouds.
Tillman recommends buying on weakness as the profit improvement and capital allocation story is firmly intact.
The analyst added that Data Cloud, Industry Solutions, MuleSoft, and AI drivers could help subscription revenue and cRPO growth inflect going forward, especially in the seasonally stronger second half and amid any improved macro backdrop.
BMO Capital analyst Keith Bachman remained Outperform with a price target of $265, down from $335.
The quarter was disappointing, and the lowered revenue guidance left some risk, given the poor execution and buying environment witnessed in the first quarter.
Wedbush analyst Daniel Ives maintained an Outperform with a price target of $315, down from $325.
As per Ives, Salesforce is on the path to a higher growth, margin, and FCF trajectory, and this is just a tiny bump in the road during a transitionary growth period.
As the AI story takes shape, Salesforce will remain one of his favorite tech names over the next year.
He would be a buyer on weakness, considering it in a turnaround in motion for a premier tech stalwart with a massive installed base led by one of the best CEOs in the global tech landscape.
DA Davidson analyst Gil Luria maintained a Neutral with a price target of $230, down from $300.
Salesforce reported softer-than-expected first-quarter results following a solid fourth quarter as booking momentum stalled and macro headwinds persisted, Luria noted.
The analyst said that profitability was slightly lower than projected. Still, management continues to drive incremental efficiency gains and generate significant FCF, giving the company increased capital allocation optionality to drive shareholder returns.
While the second-quarter guide was weaker than expected, the company reiterated fiscal 2025 numbers given favorable demand and pricing trends.
Oppenheimer analyst Brian Schwartz maintained an Outperform with a price target of $280, down from $325.
Salesforce’s bookings in the first quarter and second quarter missed street expectations driven by similar macro themes but also by internal execution, Schwartz noted, leading to a mere 2% CRPO billings growth in the first quarter.
Additionally, management maintained the fiscal 2025 revenue guidance despite the bookings shortfall and expectations that the first-quarter buying conditions persist this fiscal year, which makes the guidance less conservative, the analyst said.
As per Schwartz, the slowdown in enterprise software spending likely reflects AI crowding out investments and slower hiring.
Positively, the AI commentary and cash generation remain strong. He expects the shares to remain under pressure until investors understand that the first-quarter issues are not secular.
Mizuho analyst Gregg Moskowitz reiterated a Buy with a price target of $300, down from $345.
Notwithstanding a poor first-quarter performance and ongoing macro challenges, Moskowitz noted that Salesforce remains well-situated to help its vast customer base manage revenue and process optimization via digital transformation. It is amid a new chapter dictated by profitable growth above all else.
Piper Sandler analyst Brent A. Bracelin maintained a Neutral with a price target of $250, down from $300.
Lower guidance from Workday, Inc (NASDAQ:WDAY) last week combined with Salesforce tonight could create additional uncertainty across the SaaS industry where industry growth rates are poised to moderate for the third straight year, Bracelin said.
The re-rating factored in a more persistent macro headwind.
Goldman Sachs analyst Kash Rangan reiterated a Buy with a price target of $315, down from $345.
While acknowledging investors’ need to gain confidence in the trajectory of top-line growth and potential re-acceleration, Rangan said there are both macro and micro reasons for optimism.
The analyst noted that both headwinds from interest rate easing, uncertainty abating after this year’s elections, and outsized growth potential from Gen-AI could all serve as growth catalysts.
Rangan continued to see room for meaningful margin expansion, irrespective of the macrocycle.
With a formidable moat of differentiated front-office data, he argued that Salesforce is an under-appreciated Gen-AI winner and viewed it as a high-quality software franchise.
Roth MKM analyst Richard K. Baldry maintained a Buy with a price target of $335.
Baldry said that Salesforce’s growth appeared to strengthen in the fourth quarter, but the first quarter reverted to prior weakness.
With fourth-quarter over-execution appearing as an outlier, it seems ironic that the world’s largest sales tool vendor has so little insight into its own sales drivers, as per the analyst.
Simply calling for sales teams to start with 3x pipeline coverage instead of 2x as a solution leaves his near-term confidence low. However, he noted Salesforce remains well-positioned to benefit from an AI-driven spending rebound.
Needham analyst Scott Berg reiterated a Buy with a price target of $345.
Overall, Berg noted headwinds, including budget scrutiny, deal compression, and deal cycle elongation, while a GTM change also played a role in the lower-than-expected bookings.
These factors slowed CRPO growth to 9.5%, the poorest result he saw over the past five years. Multi-cloud deal trends and overall interest in Data Cloud served as positives, along with benefits from recent pricing and packaging changes, as per Berg.
He added that guidance was unchanged at the top line, signaling management’s confidence in their ability to execute after the miss, but investors may hesitate after the first-quarter result.
Price Action: CRM shares traded lower by 21.10% at $214.37 at the last check on Thursday.
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Latest Ratings for CRM
| Mar 2022 | Wedbush | Maintains | Outperform | |
| Mar 2022 | Canaccord Genuity | Maintains | Buy | |
| Mar 2022 | Raymond James | Maintains | Strong Buy |
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