Salesforce CEO Marc Benioff
Nicolas Kamm/AFP via Getty Images
Salesforce is the best-performing stock in the
Dow Jones Industrial Average
this year and it is getting up another leg up following its latest earnings report.
Salesforce
(ticker: CRM) shares were up 4.8% in early trading at $225.36 on Thursday after its quarterly earnings topped estimates. The move extended its lead as the top performing stock in the Dow in 2023. The shares are now up 70% this year, outshining
Apple
(AAPL) and
Microsoft
(MSFT) in the Dow, which are up 45% and 37% as of early Thursday trading.
However, the stock still languishes well below its highs of more than $300 in 2021 and analysts are split on whether it’s on a path to regain those levels under CEO Marc Benioff’s strategy of raising prices and investing in artificial intelligence.
Salesforce’s figures and outlook should boost confidence in the overall IT spending environment, according to Wedbush’s Daniel Ives. He raised his target price on the stock to $255 from $240 and kept an Outperform rating on the shares.
“We believe this quarter was a continued testament to Salesforce’s resilience in this backdrop… crushing the margin and expense profile story, continuing new investments in the shift to AI, and providing an impressive raised guidance to the year,” Ives wrote.
Salesforce is aggressively embracing the AI trend, having embedded the technology into its flagship customer-relationship-management software, messaging app Slack, and other tools. However, it doesn’t expect any material contribution from AI in its current fiscal year.
D.A. Davidson’s Gil Luria noted that Salesforce’s revenue growth continues to hover closer to historic lows of 10% to 11%. He kept a Neutral rating on the stock and a price target of $200.
“We remain skeptical of Salesforce’s ability (as well as other application vendors) to monetize on its AI investments. For us, the key question remains whether or not Salesforce can remain a double-digit grower,” wrote John DiFucci at Guggenheim Securities.
Guggenheim kept a Neutral rating on the stock.
Even more bullish commentators have questions over the time frame that AI benefits will flow through to Salesforce’s bottom line.
“Generative AI largely remains a wait-and-see story for Salesforce and the per-user functionality seems unlikely to be a needle-mover anytime soon as customers are only in the very early stages of testing/experimenting,” wrote Rishi Jaluria at RBC Capital Markets.
However, Jaluria kept an Outperform rating and $240 target price on the stock. He noted Salesforce’s operating margins reached 30% three quarters ahead of schedule and its guidance should relieve concerns about growth dropping to low single-digit percentages.
Write to Adam Clark at [email protected]
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