Should you buy Salesforce stock after hitting a high and raising your forecasts?
Salesforce (CRM) stock, up 24.86% since early 2021 and 35.25% in the past six months, surged 7.2% on Thursday, hitting an annual high in price.
Salesforce raises forecasts
Salesforce, benefiting hugely from the continued growth in demand for cloud-based software for its business’s “digital transformation,” has raised its annual sales revenue forecasts.
The revenue forecast for fiscal 2022, which ends January 31, 2022, has been raised from $ 26.2 billion to $ 26.3 billion to $ 26.25 billion to $ 26.35 billion.
Salesforce revenue forecast for FY2023 is from $ 31.65 to $ 31.80 billion, which is higher than the average analyst estimate of $ 31.52 billion.
For comparison, the company’s revenues for the entire 2021 FY. Year amounted to $ 21.25 billion, which is 24% more than the previous year.
Ideal growth pattern
Salesforce revenue statistics since 2018 show an ideal pattern of quarter-to-quarter growth at a rate of 20% -35%.
In the most recent reporting quarter, the company reported a new record and breaking the $ 6 billion milestones in total revenue for the May-July period.
Acquiring Slack Powers Salesforce
On July 21, Salesforce closed the largest deal in its history, acquiring Slack, maker of remote teamwork and web conferencing software, for $ 27.7 billion.
Salesforce today calls Slack its digital headquarters and encourages all of its customers to take advantage of the software as it into the Salesforce platforms.
The Slack acquisition also enables Salesforce to compete more against Oracle (ORCL), Microsoft (MSFT), and SAP SE (SAP).
Salesforce told analysts in August that the Slack deal would negatively impact its operating margins. However, the company said Thursday that its operating margin for 2023 will be around 20%, higher than market analysts’ forecast of 19.2%.
Salesforce CFO Amy Weaver told analysts that the Slack acquisition provides momentum for the company in many ways and that substantial earnings numbers are helping to increase operating margins slightly.
Salesforce has the world’s # 1 digital cloud platform for customer relationship management (CRM), which is in high demand as companies move to digital sales channels.
Salesforce is also a leader in artificial intelligence technologies, workflow automation, data collection, integration, and analysis from disparate sources. These products are in high demand in an age of “digital transformation,” when businesses and governments move the digital aspects of their operations to the cloud.
Market experts also cite Salesforce as one of the primary beneficiaries of the growing work trend from home.
Market analysts’ opinion
Several analysts have raised their forecasts for Salesforce stock:
Monness Crespi & Hardt Analysts raised their price target from $ 290 to $ 300 and gave them a Buy rating.
Sanford C. Bernstein raised its target price from $ 266 to $ 290 and gave it an ‘Out of Market’ rating.
Canaccord Genuity raised its price target to $ 270 from $ 200, giving the stock a Buy rating.
Salesforce’s share price at the close of trading on Thursday was $ 277.86 per share.
At the same time, Oppenheimer analyst Brian Schwartz, who rates the company’s stock as “above market” with a target price of $ 290, noted that the forecasts might not live up to expectations until the positive impact of Slack on the company’s earnings over the next few quarters.
Some analysts recommend that investors who have bought Salesforce shares take profits while they are at their highs.
