Salesforce (CRM) is scheduled to report results of its third fiscal quarter after the market close on Wednesday, November 30, with a conference call scheduled for 5:00 pm ET. What to watch for:
GUIDANCE: Along with its second quarter earnings report, Salesforce cut 2023 revenue guidance to $30.9B-$31B from $31.7B-$31.8B. Consensus, which was $31.73B at the time, has since fallen to $30.99B. Salesforce also lowered its fiscal year 2023 adjusted earnings per share view to $4.71-$4.73 from $4.74-$4.76. Consensus for EPS, which was $4.75 at the time, has dropped to $4.73. The company also provided third quarter adjusted EPS guidance of $1.20-$1.21 on revenue of $7.82B-$7.83B. Consensus for earnings, which was at $1.29 at the time, has fallen to $1.21, and consensus for revenue, which was at $8.07B, has sunk to $7.82B.
STARBOARD TAKES STAKE: Activist investor Starboard Value took a “large” stake in Salesforce after seeing a “significant opportunity” remaining at the company, Starboard founder Jeff Smith told CNBC’s David Faber in October. Smith added Salesforce should be at the same margins as its peers or higher and that Starboard wants “to be long-term owners of Salesforce”.
PARTNERSHIPS, FEATURES: In September, Sprout Social (SPT) announced a new integration with Salesforce Service Cloud to provide brands with a 360-degree view of their customer interactions. Salesforce and Snowflake(SNOW) also announced zero copy data sharing innovations in September enabling customers to unlock more value from their data. Additionally in September, Zywave announced a dedicated partnership and increased collaboration with Salesforce to further bring together the worlds of insurance agency sales and client service. The company also introduced new Customer 360 innovations in the month as well as Salesforce Genie, a hyperscale real-time data platform that powers the Customer 360 platform. Salesforce also launched a Net Zero Marketplace platform in September, enabling simpler and more transparent carbon credit purchases and announced Slack canvas, Slack huddles, a new Slack platform and Slack Partner Industry Solutions.
ANALYST VIEWS: On Monday, Stifel analyst J. Parker Lane lowered the firm’s price target on Salesforce to $185 from $200 and kept a Buy rating on the shares. In his talks with five partners in the Salesforce ecosystem over the last couple of weeks, all of them expressed that the macro environment is weighing on purchasing decisions and should contribute to a slower year in 2023, noted Lane, who updated his model to reflect greater uncertainty around the 2023 outlook.
Meanwhile, Evercore ISI analyst Kirk Materne lowered the firm’s price target on Salesforce to $200 from $225 and kept an Outperform rating on the shares after taking down his revenue and CRPO estimates ahead of company results. He believes there is enough "noise" in his checks that a more conservative view is prudent and expects it will be "a choppy quarter," but Materne added the recent reduction in force and likelihood of further cost containment in FY23 "keeps the ~20% FCF growth narrative in play."
On Tuesday, Baird analyst Rob Oliver lowered the firm’s price target on Salesforce to $210 from $230 and kept an Outperform rating on the shares. The analyst thinks Q3 results should be tempered given obvious macro slowing and FX headwinds and he believes investors will key in on indicators of bookings strength and the backlog.
Additionally, KeyBanc analyst Michael Turits lowered the firm’s price target on Salesforce to $200 from $210 and kept an Overweight rating on the shares. The analyst also trimmed his fiscal 2024 estimates. He remains positive on the long-term outlook for Salesforce as a front office applications leader, and was encouraged by the company’s fiscal 2026 $50B revenue and 25% margin analyst day targets and by the push the company may be getting on margins from activist investor Starboard. That said, Turits remains cautious regarding the near-term outlook given ongoing recession concerns, slowing cloud spend, and weaker conversations he had with a few Salesforce channels this quarter, some of whom indicated missed targets and/or slowing growth this quarter and into next year.
Published first on TheFly
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