Salesforce Stock Fell as Growth Slowed, but Wells Fargo Believes Margin Activism Might Help

Salesforce Stock

Salesforce Stock (NYSE:CRM)

Wells Fargo, an investment company, stated on Tuesday that improvements in Salesforce’s margins and the entrance of activist investors might be good catalysts for the stock even though sales growth for Salesforce (NYSE:CRM) is expected to continue slowing. As a result, Salesforce stock declined.

Analyst Michael Turrin, who has a rating of overweight and a price target of $200 per share, mentioned that investor attention is likely to be focused on margins and how quickly Salesforce stock can grow earnings beyond its stated long-term goals of 25% growth in fiscal 2026. Turrin has a price target of $200 per share and an overweight rating.

In a letter to clients, Turrin said, “Our study implies [Salesforce] is capable of producing [more than 500 basis points of operating margin increase in fiscal 2024], which is significantly over current [Street projections for roughly 160 basis points].”

He also said that Salesforce has “loosely addressed” the possibility of reducing long-term spending by an additional $3 billion to $5 billion, with the present layoffs accounting for $1.7 billion to $2.4 billion of that total.

According to Turrin, “we now forecast 23.5%/25.0% operating margin in [fiscal 2024 and 2025] as a baseline.” “We feel this reflects an operational model capable of providing significant future growth.”

Turrin also mentioned that the participation of five major activists, all of whom have seen “considerable” improvements at other recent investments, along with strong performances in their stocks, could assist in improving Salesforce’s financial results. All of these activists have seen improvements in other recent investments.

The analyst stated that “we view Salesforce as set to enjoy similar advantages,” with cost control being the main goal and divestitures towards expedited buybacks and resulting EPS accretion also likely being on the table. “We see Salesforce as positioned to experience similar benefits.”

Morgan Stanley, an investing company, forecasted that Salesforce stock might expand its profits per share at a rate of at least 20% annually over the next several years. This prediction was made in the previous month.

Featured Image: Pixabay @ RJA1988

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