Salesforce Stock (NYSE:CRM)
According to Morgan Stanley, Salesforce (NYSE:CRM) is on track to grow its earnings per share at a clip of at least 20% over the next few years. This is because the company recently underwent a restructuring, combined with activist investor involvement, which could boost the company’s financial results. As a result, Salesforce stock surged.
Analyst Keith Weiss, who has a rating of overweight on Salesforce stock, observed that new investor discussions are emerging due to these recent changes. These new investor debates focus less on the short future and more on what a leaner firm may look like.
In a note to clients, Weiss said, “Our take – given the company’s strong competitive posture in the front office for big organizations, we believe the ability for Salesforce to return to at least market growth, which we estimate at a 13% [compound annual growth rate in fiscal 2023 to 2027]; generate non-GAAP operating margins substantially over 30%; and a return to trading multiples more consistent with the large-cap software average.”
In premarket trading on Monday, shares of Salesforce (NYSE:CRM) declined by 0.8%. In contrast, shares of other cloud computing businesses, such as Adobe and Microsoft, also fell by a tiny amount.
Weiss also pointed out that the business’s leadership, headed by CEO Marc Benioff, has grown more intent on maximizing profits and that although this may prove difficult, the corporation still has a “substantial possibility to enhance efficiency” by capitalizing on opportunities to increase sales, reduce its overabundance of real estate, and better incorporate its acquisitions.
Weiss said that the recent engagement of activist investors like ValueAct, Starboard, and Elliott Management might aid the company’s ability to reach its full potential.
Weiss continued by saying, “As Salesforce enters this next chapter, which will be characterized by a return to low to mid-teens revenue [compound annual growth rate] and consistently expanding operating margins, driving a durable 20%+ EPS growth profile, we see an attractive risk/reward set up,” which will likely become interesting to a wider set of investors.
The board of directors of Salesforce (NYSE:CRM) was expanded with three new members on Friday, including Mason Morfit of Value Act and two other members.
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