Salesforce (CRM) is scheduled to report results of its first fiscal quarter after the market close on Wednesday, May 31, with a conference call scheduled for 5:00 pm ET. What to watch for:
GUIDANCE: Along with its fourth quarter earnings report, Salesforce announced 2024 revenue guidance of $34.5B-$34.7B. Consensus, which was $34.03B at the time, has since risen to $34.65B. Salesforce also forecast 2024 adjusted earnings per share of $7.12-$7.14. Consensus for EPS, which was $5.84 at the time, has jumped to $7.14. The company also provided first quarter adjusted EPS guidance of $1.60-$1.61 on revenue of $8.16B-$8.18B. Consensus for earnings, which was at $1.32 at the time, has increased to $1.61, and consensus for revenue, which was at $8.05B, has risen to $8.18B.
ACTIVIST INVESTORS: In January, the Wall Street Journal reported activist investor Elliott Management made a multi-billion-dollar investment in Salesforce, which followed the acquisition of an undisclosed stake by Starboard in October. Additionally in January, CNBC reported Jeff Ubben’s Inclusive Capital had taken stake in the company. Following the report, Salesforce announced appointments to the company's board of directors, Arnold Donald, former president and CEO of Carnival (CCL); Sachin Mehra, CFO of Mastercard (MA) and Mason Morfit, CEO and chief investment officer of ValueAct Capital.
In February, the Wall Street Journal reported that Third Point has built a stake in Salesforce and in March, CNBC reported Elliott had nominated a director slate for the company’s board. Following Q4 earnings, Elliott released a statement which said, “Salesforce's set of announcements today represents progress towards regaining investor trust. The acceleration of margin targets, commitment to responsible capital-return priorities, creation of a business transformation committee and disbanding of the M&A committee are necessary steps forward…Elliott intends to continue working with Salesforce as we evaluate the level of engagement necessary to achieve the best outcome for the company.”
And in March, Salesforce and Elliott issued a joint statement, which said, “In light of the company's previously announced ‘New Day’ multi-year growth framework, fiscal year 2023 results, fiscal year 2024 transformation initiatives, Elliott decided not to proceed with director nominations, and Salesforce and Elliott have committed to continue the working relationship they have developed together.”
PARTNERSHIPS, FEATURES: In February, Salesforce announced that Santander UK is using its technology to power Santander Navigator and in March, Salesforce and OpenAI introduced the ChatGPT app for Slack. Additionally in March, Salesforce launched Einstein GPT, a generative AI CRM technology, to deliver AI-created content across every sales, service, marketing, commerce, and IT interaction, at hyperscale. The company said, “With Einstein GPT, customers can then connect that data to OpenAI’s advanced AI models out of the box, or choose their own external model and use natural-language prompts directly within their Salesforce CRM to generate content that continuously adapts to changing customer information and needs in real time.”
The company also announced in March that The RealReal (REAL) had streamlined its selling and shopping experience using Salesforce and in April, Paramount Global (PARA) and Salesforce announced the launch of Paramount’s new diversity reporting platform.
ANALYST VIEWS: On Tuesday, Wells Fargo raised the firm's price target on Salesforce to $250 from $225 and kept an Overweight rating on the shares. The firm noted that its recent checks commonly suggested partners hit Q1 targets, but with more pronounced seasonality. Despite ongoing headwinds, it appears enterprises are finding ways/feeling confident utilizing new budgets, and with Salesforce standing to benefit from IT consolidation, partners have maintained 2023 growth expectations since January. While current guidance is already calling for 450 bps of expansion, partner commentary suggested upside to guidance remains, Wells said.
Meanwhile, Canaccord analyst David Hynes raised the firm's price target on Salesforce to $230 from $215 and kept a Buy rating on the shares. The analyst previewed the quarter believing focus will be placed on bottom line progression. With Q1 being a seasonally strong cash flow quarter and still low-hanging fruit remaining with respect to operating leverage, the firm expects the April quarter will be another confirmatory data point that CRM is on the fast track to 30%+ margins.
Additionally on Friday, Citi analyst Tyler Radke raised the firm's price target on Salesforce to $229 from $210 and kept a Neutral rating on the shares. Checks with Salesforce partners during the quarter were "mixed but not significantly worse" than Q4, the analyst said. The firm believes there is limited upside to sales numbers for the fiscal year given the macro uncertainty and "Salesforce fatigue" affecting renewals.