Salesforce Shares Could Double in Value, Goldman Analyst Says:


Despite rising interest rates the economy and stock market starts to rattlewe found that the vote at the customer’s request at Dream power — called Salesforce’s big annual development conference in San Francisco — was generally positive.

Execs at Salesforce, in particular, took a merry note.

“CFOs have a lot of power right now,” co-CEO of Salesforce Bret Taylor told Yahoo Finance Live. “People are not only focused on revenue growth, as they have been in recent years, but also on revenue growth. … It’s obviously a more measured environment, but I think technology is the solution.”

Salesforce put its money where its mouth is at the conference, promising a 25% operating margin by calendar year 2025. It’s the first time Salesforce has committed to a public operating margin target – if it is met, it would represent a significant increase versus the 2022 target of 20.4%.

The company also expects revenue to reach $50 billion by 2025, compared to Wall Street estimates for this year of $31 billion.

Marc Benioff, chairman and CEO of Salesforce speaks at the Wall Street Journal Digital Live conference at the Montage hotel in Laguna Beach, Calif., Oct. 20, 2015. REUTERS/Mike Blake

All of this caught the eye of Goldman Sachs software analyst Kash Ranga, who attended a Dreamforce meeting with Salesforce customers.

Rangan then comes out on Thursday with one of the more optimistic calls to Salesforce on Wall Street:

Where the head of Rangan stands on Salesforce in general:

“The co-CEO structure under Marc Benioff and Bret Taylor appears to be working well and the management team seems generally united in its strategy of balancing growth and profitability. Looking beyond fiscal year 2026, we see a operating margin potential of 35-40% Broader conclusion is that digital transformation remains top of mind for customers at the annual Dreamforce user conference, which has more than 40K paying attendees.Newly promoted president and COO Brian Millham made a reassuring point that the pipeline of potential business continues to look promising.”

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Rangan added, “Salesforce continues to invest in organic innovation, exemplified by the release of Genie, a real-time customer data platform. Overall, Salesforce ranks highly in Goldman Sachs’ framework for software investment.”

Inside Salesforce optimistic long-term guidance:

“Because Salesforce uses several operating levers in their model to index to this profitability, we see this potentially driving the company’s valuation several times higher over the longer term, as was the case with Microsoft, Adobe, AutoDesk, and Intuit. were encouraged by CFO Amy Weaver’s commitment to this goal, even if the company decides to participate in mergers and acquisitions.We point to Salesforce’s ability to show margin expansion over the past twelve months, despite the integration of Slack, and the iteration of its FY23 margin targets despite top-line headwinds as evidence points to its ability to deliver on these long-term targets.”

The Goldman analyst added that “While the path to this level of profitability is unlikely to be linear given the necessary go-to-market and product investments, we are reassured by the cadence this guide suggests beyond the fiscal outlook. year 2023 for 20.4% margins.”

Check out the performance of the acquired assets Slack, Mulesoft, and Tableau:

“We emphasize that Salesforce is able to drive innovation and growth through its acquired assets. We see more growth potential from Slack, which was acquired with a revenue multiple of 27x ($1.1 billion) and is today at 1.4x grew to ~$1.5 billion in revenue, which we believe is still in the early stages of product adoption and innovation within the Salesforce ecosystem, with key new features announced this week (more on this below). Likewise, previous acquisitions support such as ExactTarget and Demandware, our belief in the growth potential of acquisitions.”

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Brian Sozzi is a great editor and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and further LinkedIn.

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