Shares of cloud-based tech firm Salesforce (CRM) recently gave up their post-earnings gains as the broader tech scene continued trending lower on the back of the latest rate hike. Inflation could persist, calling for more rate hikes that will continue to weigh heavily on high-multiple tech stocks.
Still, Salesforce is not like most other cloud companies that have imploded like a paper bag ahead of a Fed-induced economic slowdown. Even if a recession hits in 2023, Salesforce is an enterprise behemoth that may not face nearly as much demand destruction as anticipated.
Benioff views Salesforce as a firm that’s recession resilient, and I think he’ll be proven right over the coming 18 months, as corporation spending remains more resilient than consumer spending.
On TipRanks, CRM scores a 6 out of 10 on the Smart Score spectrum. This indicates a potential for the stock to perform in line with the broader market.
Salesforce’s Bumpy Road Ahead
As the economy goes through tough times, Salesforce looks more than ready to continue moving forward with intriguing innovations and ongoing integrations with its popular Slack platform.
Slam Salesforce for buying Slack at a lofty price tag, if you will, but the potential synergies could have the potential to be enormous as the digital transformation continues. In a prior piece, I highlighted the firm’s recent Troops.ai deal and the potential for bots to automate many tedious workplace tasks.
Slack bots are getting smarter, and they’re making the lives of many workers easier. As tech multiples continue to go bust, look for Salesforce to find more such tack-on deals to improve its presence while valuations are decent. Further, expect Salesforce to continue spending money on innovations that build upon the digital transformation trend, which could help Salesforce navigate through coming recessionary headwinds.
I am bullish on CRM stock and think the recent pullback allows investors to get the quarterly results for a discount.
Salesforce: Continues to Innovate
Many tech startups that have taken the brunt of the damage have already begun laying off employees. Understandably, unprofitable unicorns and white-hot IPOs have shed over 70-80% of their value amid the tech-focused sell-off.
Salesforce and other big-tech firms that have shed less than 50% of their value are still feeling the pinch. Still, their balance sheets and operating cash flow streams are robust enough to allow for continued innovation investments during difficult economic periods.
Salesforce and many peers are being more cautious when it comes to hiring. However, that does not mean Salesforce is ready to slow down with its growth. On the growth front, the firm is going full speed ahead, with intriguing innovations and strategic investments likely to be made through the next recession.
Salesforce Going Ahead With Its NFT Cloud amid Crypto Bust
Recently, Salesforce announced its intent to jump into the crypto world with its NFT (Non-Fungible Token) cloud marketplace. As you may know, cryptocurrencies like Bitcoin have crumbled viciously in recent months.
The launch of the NFT cloud is ill-timed and has caused controversy among the firm’s employees. NFTs and crypto remain speculative and unregulated. Despite employee resistance, Salesforce is ready to take its NFT marketplace to the next step.
Though NFTs will not be everybody’s cup of tea, I view Salesforce’s NFT cloud as a low-risk/high-reward proposition. NFTs may be losing interest amid the latest speculative bust. However, the NFT cloud could be an intriguing platform that could take share away from Coinbase’s (COIN) NFT platform.
Arguably, Salesforce is one of the more trusted names within the tech community. Though such a project could have limited success amid the crypto bust, there’s no telling how popular the marketplace could get come the next speculative boom that could accompany the transition into the metaverse.
In any case, Salesforce doesn’t have a lot to lose with such a project, even if crypto winter is up ahead.
Teeing Up Another Acquisition?
The Troops.ai acquisition is a small-scale deal that may not leave Benioff and company satisfied amid this recent downturn in tech stocks. There are a lot of intriguing takeover targets that Salesforce could hunt down, now that multiples are close to the lowest they’ve been in years.
With a world of cloud stocks to consider, Salesforce may have one more big deal up its sleeves before the year ends. Although a Slack-sized deal is less likely, Salesforce could pounce on one of the many bets in its Ventures portfolio. Cloud-based financial tech firm nCino (NCNO) is one firm that stands out with a market cap that’s now below $3.5 billion.
Wall Street’s Take
According to TipRanks’ analyst rating consensus, CRM stock comes in as a Strong Buy. Out of 34 analyst ratings, there are 30 Buy recommendations, and four are Hold recommendations.
The average Salesforce price target is $241.03, implying an upside of 47.6%. Analyst price targets range from a low of $175.00 per share to a high of $332.00 per share.
The Bottom Line on Salesforce Stock
Salesforce is a wonderful company with a lot of things going for it. Recession or not, I expect the firm to continue innovating and better positioning itself for the next economic boom.
The digital transformation trend could power many high growth days for the firm as it continues to bolster its moat while taking steps to beef-up margins.