Salesforce’s (CRM) delivered a strong FQ3 showing on Wednesday, but that was not enough to stave off the bears with the shares falling 10.5% over the past two trading sessions.
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In the October quarter, the software giant saw revenue rise by 14.3% year-over-year to $7.84 billion, beating analyst expectations by $10 million. Of that haul, subscription and support revenue reached $7.23 billion (vs. the Street at $7.25 billion) while services at $604 million easily trumped consensus ($577.8 million).
There was a conclusive beat on the bottom-line, as adj. EPS of $1.40 came in some distance above Wall Street’s $1.22 forecast.
However, for the fiscal fourth quarter, revenue is anticipated in the $7.9 billion to $8.03 billion range, falling just shy of analyst expectations for $8.02 billion. The company also said the impact of foreign currency exchange rates will likely hit it to the tune of $900 million.
But the miss on the outlook did not seem to be the main reason for the share price drop. More likely investors were reacting to the news that co-CEO Bret Taylor will vacate his post to start his own company, leaving co-founder and co-CEO Marc Benioff to once again lead on his own.
Like others, Wedbush’s Daniel Ives was taken aback by the unexpected announcement.
“The Street will view this as a shocker with Taylor one of the mainstays in the CRM strategy although Benioff remains the core hearts and lungs of the Salesforce story,” the analyst said. “With Taylor leaving we can see Benioff potentially getting more aggressive on M&A in the cloud landscape as more private and public vendors struggle in a softer macro backdrop. This is all about the battle vs. MSFT for market share in the cloud and collaboration space with CRM in a strong position to further build out its product footprint over the coming years.”
All in all, there’s no change to Ives’ Outperform (i.e., Buy) rating although to reflect a “lower multiple in this macro,” the analyst lowered his price target from $215 to $200. (To watch Ives’ track record, click here)
Overall, CRM stock is currently being tracked by 32 analysts, of which 25 say Buy and 7 suggest to Hold, making for a Strong Buy consensus rating. The average target presently stands at $203.04, implying the shares will appreciate by 27% in the year ahead. (See Salesforce stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
