Salesforce (NYSE:CRM) is a global software company that provides market-leading Customer Relationship Management [CRM] software. The company serves an elite list of clients which includes Ford (F), L'Oréal (OTCPK:LRLCY), and nearly all of the Fortune 1000. The company has grown via acquisition and continued to produce strong financial results in the third quarter of FY23, beating both top and bottom-line growth estimates. Despite this, the stock price is down 47% from its highs in November 2021. In this post, I'm going to break down the company's financials and valuation, let's dive in.
Salesforce reported strong financial results for the third quarter of the fiscal year 2023. Revenue was $7.84 billion which increased by 14% year over year and beat analyst estimates by $3.41 million. The main headwind for the company was a strong dollar which impacted international revenue by ~$300 million. On a constant currency basis revenue increased by 19% year over year.
Breaking Salesforce revenue down by region, the Americas is the largest contributor making up 68% of total revenue and increasing by 16% year over year to $5.4 billion. This is a positive sign as it means the strong dollar is only impacting foreign exchange headwinds for the remaining 32% of the company. EMEA revenue increased by 10% year over year to $1.745 billion, on a constant currency basis this increased by a rapid 23% year over year. The Russia-Ukraine war has acted as a catalyst for devaluation in the Euro which has caused currency holders to retreat to the safety of the U.S dollar. The APAC region was the smallest revenue contributor making up 9.3% of total revenue but still increasing by a rapid 30% to $731 million on a constant currency basis.
By business unit/product, Salesforce's flagship Sales Cloud continued to grow its revenue by 12% year over year. Salesforce was a pioneer in Sales Automation and its product is widely known as the best-in-class solution for enterprises. Gartner gives the Sales Cloud the highest rating on its website by customer review number and star rating. The IDC has ranked Salesforce as number one in CRM for nine years in a row, as it continues to maintain market dominance. The company does face competition from cheaper alternatives such as HubSpot (HUBS) but that platform is more popular with the SMB market. The strategy of Salesforce has been to "enable customer-focused" companies. This means the business operates a range of software platforms from the initial Sales to Marketing Automation (Pardot) and Customer Service. The Service part of the business continued to produce solid growth increasing its revenue by 12% year over year to $1.9 billion.
The beautiful thing about Salesforce is the company hasn't just created a multitude of products but a "platform" where Apps can be built on top and integrations can be made. I was recently speaking to a "Salesforce developer" who informed me that Salesforce uses its own special programming language called "Apex" which is similar to Java. However, the company also offers a series of "low code" app-building technologies, which employees can use to build automation tools and digital experiences for customers. The beautiful thing about this setup is the more custom apps and integrations are made, the less likely a customer will leave as "switching costs" have been layered on. Therefore it's no surprise that the Salesforce Platform and Chat application Slack reported $1.5 billion which increased by 18% year over year. The internal messaging application Slack was acquired in July 2021 for an eye-watering $27.7 billion. The acquisition was criticized heavily at the time, but I believe Salesforce aims to make the application an easy upsell to its vast range of enterprise clients. I can't argue with the logic, but the price tag is fairly hefty given the number of productivity tools on the market.
The Salesforce Marketing & Commerce platform increased its revenue by 12% year over year, as this segment was impacted heavily by FX headwinds.
In 2019, Salesforce acquired data visualization company Tableau for $15.7 billion. Similar to the Slack acquisition this was a fairly hefty price but the fact it was an all-stock deal was a silver lining. Tableau is also the leading data visualization provider and is poised to continue its growth in the big data industry. Therefore it is no surprise to see that revenue for Tableau and its integration platform MuleSoft increased by 13% year over year to $1 billion.
Salesforce has a vast array of customers across multiple industries which includes "nearly every" Fortune 1000 company. Salesforce believes every company is becoming a "customer-focused" company and thus the adoption of Salesforce makes sense. Salesforce recently signed a deal with T-Mobile (TMUS) as they work to help them create the "next generation" of user experience with the Salesforce Professional services team. This deal builds upon Salesforce's telecom industry experience as it works with "almost every" major player.
Financial Services is another area Salesforce dominates as it works with "all the major financial service companies". An example includes Bank of America (BAC) which has been a customer for 20 years and Salesforce is still helping the business to innovate.
Salesforce is continually innovating itself and has recently launched its customer data platform [CDP] called Salesforce Genie. The platform already has 500 customers and aims to help businesses create a 360' view of the customer in real-time. This can also be integrated with AI models from Amazon Web Services (SageMaker) and Snowflake (SNOW).
Salesforce has a huge pipeline of future revenue under contract which equates to a staggering $40 billion in RPO. This gives immense consistency to the revenue and makes Salesforce a highly prized company.
Salesforce reported solid earnings in the third quarter of FY 2023. EPS was $0.21 which beat analyst expectations by $0.11. Salesforce reported $313 million in operating cash flow which is down slightly from the prior year but cash flow does tend to fluctuate. For example, the company has historically had a spike in cash flow during the fourth quarter as its customers renew contracts, this is a trend that is expected next quarter.
Salesforce has a solid balance sheet with $11.9 billion in cash, cash equivalents and marketable securities. The company does have fairly high long-term debt of $9.4 billion but just $1.18 billion in current debt.
In order to value Salesforce I have plugged the latest financials into my advanced valuation model which uses the discounted cash flow method of valuation. I have forecasted a conservative 15% revenue growth for next year which is assuming continuing FX headwinds. In addition, I have forecasted 16% revenue growth per year for the next 2 to 5 years, as economic conditions are likely to improve.
To increase the accuracy of the valuation I have capitalized R&D expenses which has lifted net income. In addition, I have forecasted a 24% operating margin over the next 9 years.
Given these factors I get a fair value of $162 per share, the stock is trading at $160 per share at the time of writing and thus is "fairly valued". This makes sense for a company of such high quality, in a strong leadership position with a huge pipeline of revenue and a strong customer base of enterprises.
As an extra datapoint, Salesforce trades at a Price to Sales ratio = 5, which is 41% cheaper than its 5-year average.
The high inflation and rising interest rate environment has caused many analysts to forecast a recession. Business decision-makers are cutting costs and in a state of fear, like a rabbit caught in the headlights. The likelihood of this is longer sales cycles and a reluctance to embrace new upsell opportunities. The FX headwinds are also impacted international revenue, which I imagine will be a cyclical issue.
Salesforce is a tremendous technology company which is a true leader in the CRM arena. The business has continued to produce strong financial results and the only headwind looks to be from unfavorable FX rates. The stock is fairly valued at the time of writing and thus could be a great long-term investment.
On Dec. 22 , C3.ai's (AI 2.80%) stock closed at an all-time high of $177.47, boosting its market cap to $17 billion. At the time, many investors were dazzled by C3's stellar revenue growth and the disruptive potential of its enterprise artificial intelligence (AI) algorithms -- which can be integrated into an organization's existing software infrastructure to cut costs, optimize workflows, Boost employee safety standards, and detect fraud.
But today, C3's stock trades at about $12.50 a share with a market cap of $1.4 billion. Investors fled as its growth cooled off and its losses widened, while other red flags -- including its customer concentration issues, the hiring of three CFOs in just two years, and an abrupt shift from subscriptions to usage-based fees -- hinted at an existential crisis.
Those issues also cast doubts on the notion that C3.ai could disrupt entrenched tech giants like Salesforce (CRM 3.52%), the world's top provider of cloud-based customer relationship management (CRM) services.
C3's founder and CEO, Tom Siebel, has frequently compared his company to Salesforce, and he once even dismissed the CRM leader's integrated AI tools as "all marketing and very little technology." Yet Salesforce remains much larger than C3. It has a market cap of about $150 billion, and it's expected to generate nearly 120 times as much annual revenue as its tiny industry peer this year. So could C3 still evolve into the next Salesforce over the long term?
Siebel's previous company, Siebel Systems -- which was acquired by Oracle in 2006 -- notably created the first digital CRM platform in 1995, long before Salesforce launched its first cloud-based CRM services. However, C3 is a very different type of company and approaches the enterprise software market in a more flexible manner than Salesforce.
Whereas Salesforce locks users into its walled garden of cloud-based CRM, sales, marketing, and analytics services, C3 provides AI algorithms that can be plugged in to a wide range of software. For example, C3's CRM platform integrates its AI algorithms into Microsoft's Dynamics CRM platform and Adobe's Experience Cloud (marketing, analytics, advertising, and commerce tools) to create an AI-powered alternative to Salesforce. Alphabet's Google Cloud also integrates C3's AI algorithms into its own services. C3 even provides its AI algorithms as pre-built stand-alone applications.
C3 initially charged recurring subscriptions like Salesforce, but it pivoted to a usage-based model earlier this year. Salesforce's subscriptions are sticky, but C3's approach is more flexible and gives customers more options if they aren't willing to commit to subscription-based contracts.
Salesforce went public in 2004. Between fiscal 2005 and fiscal 2022 (which ended this January), its annual revenue soared from $176 million to $26.49 billion, representing a compound annual growth rate (CAGR) of 34.3%. It grew so rapidly for four reasons: It established a first-mover's advantage in the cloud-based CRM market, it benefited from the long-term digitization of businesses, it expanded through acquisitions, and it locked in its users with sticky services and subscriptions.
C3 doesn't boast those same strengths. It's carving out a niche market instead of establishing a mainstream one, it's building open software solutions instead of walled gardens, and it doesn't have enough cash to make big ecosystem-building acquisitions yet. It also has a customer concentration issue: It generated 30% of its revenue from a joint venture with the energy giant Baker Hughes last year -- and that crucial deal will expire in fiscal 2025.
To make matters worse, C3's growth is already cooling off. Its revenue surged 71% in fiscal 2020 (which ended in April 2020), but rose just 17% in fiscal 2021 as the pandemic disrupted the energy and industrial markets.
Its revenue grew 38% to $253 million in fiscal 2022 as those headwinds dissipated, but it anticipates just 1% to 7% growth this year as the macro headwinds prompt enterprise customers to curb their spending. By comparison, Salesforce -- which faces many of those same headwinds -- still expects its revenue to rise 17% to about $31 billion this year.
Siebel believes C3's annual revenue growth will "revert to historical annual growth rates" of over 30% in fiscal 2024 "and beyond," but that's a tall order for a company that has repeatedly missed and reduced its own guidance over the past year.
It's highly doubtful that C3 will evolve into a tech titan like Salesforce. Instead, it will likely remain a niche provider of AI algorithms that is tightly tethered to the macro-sensitive energy and industrial markets. Investors who are looking for a long-term play on the digitization and automation of businesses should simply stick with Salesforce instead of betting on a poorly diversified AI software developer like C3.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Leo Sun has positions in Adobe Inc., Alphabet (A shares), and Salesforce, Inc. The Motley Fool has positions in and recommends Adobe Inc., Alphabet (A shares), Alphabet (C shares), Microsoft, and Salesforce, Inc. The Motley Fool recommends C3.ai, Inc. and recommends the following options: long January 2024 $420 calls on Adobe Inc. and short January 2024 $430 calls on Adobe Inc. The Motley Fool has a disclosure policy.
Stewart Butterfield speaks on November 08, 2019 in San Francisco, California.
Phillip Faraone | Getty Images
Salesforce said Monday that Slack founder and CEO Stewart Butterfield is leaving the company. He'll be succeeded by Lidiane Jones, an executive vice president at Salesforce who joined in 2019.
Butterfield's announced departure comes days after Salesforce said co-CEO Bret Taylor was stepping down just a year after being promoted to share the top job with Marc Benioff, Salesforce's co-founder.
Benioff informed employees on a call on Monday that Butterfield was leaving, according to people familiar with the matter who asked not to be named because they weren't authorized to speak on the record. Salesforce acquired Slack for about $27 billion last year, its largest purchase ever. The deal was announced in late 2020.
"Stewart is an incredible leader who created an amazing, beloved company in Slack," a company spokesperson told CNBC in a statement. "He has helped lead the successful integration of Slack into Salesforce and today Slack is woven into the Salesforce Customer 360 platform. Stewart also was instrumental in choosing Lidiane Jones as the next Slack CEO to lead it into its next chapter. Lidiane has a strong background in customer and enterprise tech and has been among Salesforce's leadership for over three years. We're grateful for Stewart and excited for Lidiane as she takes over the reins of Slack."
Tamar Yehoshua, Slack's product chief, will also depart, along with Jonathan Prince, senior vice president in charge of marketing, brand and communications, the people familiar said. Noah Weiss, senior vice president of product at Slack, will succeed Yehoshua, Butterfield said in a Slack message to all Salesforce employees that CNBC viewed.
Jones spent more than 12 years at Microsoft, before leaving to join Sonos in 2015. She's been at Salesforce since 2019 and is currently executive vice president and general manager of digital experience clouds.
Butterfield originally worked with the other co-founder of Slack, Cal Henderson, at photo-sharing website Flickr, which Yahoo acquired in 2005. In 2009 the two men founded Tiny Speck as they sought to build an online video game named Glitch. The game failed to become a world-beating hit and Tiny Speck shut it down. Tiny Speck had developed software employees had used to build Glitch, and the startup made the software available to the public as Slack in 2014.
It grew quickly, mobilizing Microsoft. When Microsoft launched Teams in 2016, Slack took out an ad in The New York Times to welcome Microsoft to the market.
"I'm not going to do anything entrepreneurial," Butterfield wrote in the Slack message. "As I said in my announcement to Slack team, these days my fantasies are about gardening. As hackneyed as it might sound, I really am going to spend more time with my family (as well as work on some personal projects, focus on health and generally put time into those things which [are] harder to do when one is leading a large organization)."
In March 2020 Butterfield met with Taylor and told him Slack wanted to acquire Quip, the productivity app Taylor sold to Salesforce in 2016, from Salesforce. Months later, Taylor told Butterfield that while Salesforce wasn't interested in selling Quip to Slack, Salesforce was interested in buying Slack.
Butterfield said that the leadership changes at Slack were not related to the announcement of Taylor's resignation from last week. "We've been planning this for a while," Butterfield wrote.
New York CNN Business —
Tech stocks have taken a nasty tumble this year, but some are doing even worse than others. Exhibit A: software giant Salesforce.
Shares of Salesforce (CRM) have plunged about 40% so far in 2022. That makes it the second-worst performer in the Dow, trailing only chip leader Intel (INTC). Salesforce (CRM) has lagged the performance of top cloud software rivals such as Microsoft (MSFT), Germany’s SAP (SAP) and Oracle (ORCL).
Salesforce isn’t really doing all that badly. In fact, the company reported sales growth of 22% from a year ago back in August, but it also cut its revenue and profit forecasts at the time.
Salesforce said it now expects earnings per share of about $1.20 to $1.21 for this quarter and sales of $7.82 billion to $7.83 billion. Analysts had been expecting earnings of $1.29 a share and revenue of nearly $8.1 billion.
So is Salesforce, led by co-CEOs Marc Benioff and Bret Taylor, due for a comeback in 2023? Or will the company remain in Wall Street’s penalty box as it absorbs and integrates a series of expensive acquisitions over the past few years?
Salesforce has spent nearly $50 billion since 2018 to buy application software company MuleSoft, data visualization software leader Tableau and workplace productivity suite Slack. The Slack deal cost Salesforce about $28 billion.
Investors will get an update on how all these deals are panning out when Salesforce reports its latest earnings after the closing bell Wednesday. Analysts are predicting that sales will be up 14% from a year ago but profits will fall slightly.
Salesforce president and chief financial officer Amy Weaver conceded during an analyst meeting in September that “we have seen increased risks and uncertainties” in latest months. But she stressed that demand for the company’s software remains strong.
A majority of Wall Street analysts remain bullish on Salesforce. According to data from Refinitiv, 40 of the 50 analysts that cover the company have a “buy” rating on the stock. (The remaining 10 have a “hold.” There are no “sell” recommendations.)
And the consensus price target for the stock is nearly $216 a share, 40% higher than current levels.
Still, analysts are likely to have questions about what’s next for Slack under Salesforce’s ownership. Microsoft has stepped up its own competitive efforts versus Slack with its Teams product.
“Microsoft Teams continues to be the gorilla in the room, indicating that existing customers of Salesforce have been less responsive to picking up Slack,” said Daniel Morgan, senior portfolio manager with Synovus Trust Company, in a report. “Mounting competition from Teams and increasing pricing pressure create some headwinds.”
Salesforce cofounder and co-CEO Marc Benioff speaks during the grand opening of the Salesforce Tower, the tallest building in San Francisco, Calif., Tuesday, May 22, 2018.
Karl Mondon | Bay Area News Group | Getty Images
Salesforce reported earnings and revenue on Wednesday that beat analyst expectations. It also announced that co-CEO Bret Taylor is stepping down. CEO and Salesforce co-founder Marc Benioff will the be sole person in charge of the company.
Salesforce stock fell over 6% in extended trading.
Here's how the company did versus Refinitiv consensus estimates for the quarter ending in October:
Salesforce said it expected between $7.9 billion to $8.03 billion in revenue in the company's fourth fiscal quarter, lower at the midpoint than analyst expectations of $8.02 billion in sales in the fourth quarter. The company also said it would take a $900 million hit in sales because of foreign currency effects.
Salesforce's total revenue increased 14% year-over-year. Last quarter, Salesforce trimmed its year-end estimates for both revenue and earnings, citing a weaker economic cycle. It reaffirmed those estimates on Wednesday.
Salesforce said that its operating cash flow came in at $313 million for the quarter, which was a decrease of 23% year-over-year.
Subscription and support revenue, which includes the company's flagship Sales Cloud software and comprises the majority of the company's sales, came in at $7.23 billion, which was up 13% year-over-year.
The Platform and Other category that includes Slack reported $1.51 billion in sales, an 18% increase year-over-year.
Salesforce spent $1.7 billion on share repurchases during the quarter, the company said.
Slack co-founder and CEO Stewart Butterfield will leave the organization next month.
Business Insider broke the story on Monday. Salesforce, the parent company of Slack, confirmed the development in a statement to TechCrunch. CEO Stewart Butterfield will be replaced by Lidiane Jones, executive vice president and general manager of Salesforce’s digital experience clouds.
Butterfield joined Salesforce last year following the software giant’s $28 billion acquisition of Slack. The firm was previously traded on the New York Stock Exchange (NYSE). Slack secured more than $1.2 billion from investors before going public in 2019 at a value of $21 billion.
Butterfield co-founded Slack in 2013. He previously founded photosharing website Flickr. In addition, Butterfield was a founding partner of videogame development company Tiny Speck. Slack was initially developed as an internal collaboration tool for Tiny Speck.
“Stewart is an incredible leader who created an amazing, beloved company in Slack”, Salesforce stated today. “He has helped lead the successful integration of Slack into Salesforce.”
In an internal message to Slack staff, Butterfield reportedly indicated that his intended resignation is unrelated to the news of Salesforce co-CEO Bret Taylor stepping down next month. Butterfield stated that he has been planning his departure for a while. According to the CEO, the timing coincidentally aligns with Taylor’s leave.
Butterfield added that two other Slack leaders will resign shortly. CPO Tamar Yehoshua and VP Jonathan Price are preparing to leave Salesforce.
Moreover, Salesforce subsidiary Tableau recently announced that CEO Mark Nelson will step down from his position. Nelson rose to the role after joining Tableau as an executive vice president of product development in 2018.
Salesforce acquired Tableau through a $15.7 billion deal in 2019. The company develops a popular data visualization platform with the same name. Businesses use the software to transform data into understandable graphs and dashboards.
Salesforce is losing a number of key execs in the wake of Bret Taylor's departure.
Slack CEO Stewart Butterfield is also departing, along with some other product-focused execs.
The departures come as Salesforce's growth has slowed and it's facing tough questions.
Salesforce is in the midst of a serious brain drain at the highest levels. Last week, co-CEO Bret Taylor made the surprise announcement that he'd be departing the company.
Shortly afterwards came the news that Mark Nelson, the CEO of Salesforce subsidiary Tableau, and Steven Tamm, a CTO at the cloud tech giant, are also departing. In November, the company also said Gavin Patterson, the company's chief strategy officer who had previously been its chief revenue officer will depart at the end of January.
Then, earlier this week, Insider reported that Stewart Butterfield, CEO of Slack — the workplace chat app that Salesforce acquired in 2021 for $27.7 billion —will be leaving the company in the new year. Tamar Yehoshua, Slack's chief product officer, is also resigning, as is Slack senior VP of communications Jonathan Prince.
It's not clear if the timing of all these departures is anything more than coincidence: In a memo to employees, Butterfield wrote that his plans to depart have nothing to do with Taylor's, as Insider earlier reported.
Still, it comes at a critical moment for Salesforce and its now-sole CEO Marc Benioff. The company's stock is down some 48% from the beginning of the year, as the larger tech downturn takes its toll on the markets. Salesforce has warned investors that a slowing economy is making it more difficult to close deals as IT spending stalls out, even as investors push Benioff to demonstrate a commitment to improving its profit margins.
And the specific executives who are hitting the exits represent some of Salesforce's biggest bets on the future. Taylor himself was seen as a product visionary who would help Salesforce break into new markets, as seen when he masterminded the Slack acquisition. Indeed, Slack and Tableau represented Salesforce's two largest acquisitions in its history, as it invested in new lines of business.
The departures of Taylor, Butterfield, and Nelson come as Salesforce's strategy comes under the microscope on Wall Street.
With Slack and Tableau, Salesforce already had a lot to prove. Wall Street thought that the $27.7 billion it paid for Slack and the $15 billion for Tableau was far too steep given the company's financial situation. The scrutiny hasn't stopped.
"Growth has been slowing for years," Bernstein analysts wrote in a latest note to clients. "But that has not been readily apparent due to the cadence of large acquisitions which generate a multiyear tailwind to growth due to acquisition accounting."
Taylor, who had been COO of Salesforce before becoming co-CEO in 2021, championed the two as key to a strategy of building the company's platform into an all-in-one tool for sales, to service, to marketing and commerce, to data analysis. Slack would be the "digital HQ" where work gets done, while Tableau helps customers crunch the massive amounts of data stored in the Salesforce platform and turn it into useful insights.
Neither Slack nor Tableau is going anywhere. Salesforce has already said that Lidiane Jones, an executive VP, will take over for Butterfield as Slack CEO. She'll be working with Cal Henderson, Slack's CTO and cofounder, who remains in his role. And Salesforce has said that in the wake of Nelson's departure, Tableau will be rolled more closely into Salesforce's engineering organization.
What it does mean, however, is that Salesforce, Slack, and Tableau are all losing the biggest champions of the integrated product strategy right as the company faces hard questions.
Amid the chaos, however, some on Wall Street thinks there may be an opportunity.
While some of Salesforce's most experienced execs remain on Benioff's leadership team, including CFO Amy Weaver and COO Brian Millham, analysts think Benioff needs to recruit new leadership.
Now could be a good time to recruit talent from a smaller rival or startup, Jaluria told Insider. The relative stability of Salesforce compared to a smaller startup during an uncertain economic environment would be a major draw.
"You need leadership that's focused on the next chapter of Salesforce and the way things should be done, not necessarily the way things have been done from the get go," RBC analyst Rishi Jaluria said last week at the time of Taylor's announcement.
Read the original article on Business Insider
Salesforce (CRM 3.52%) posted its latest quarterly report on Nov. 30. For the third quarter of fiscal 2023, which ended on Oct. 31, the cloud-based software company's revenue rose 14% year over year (and grew 19% in constant currency terms) to $7.84 billion and surpassed analysts' estimates by $10 million. Its adjusted earnings increased 10% to $1.40 per share and also cleared the consensus forecast by $0.18.
Salesforce's growth rates seemed stable, but they didn't impress the bulls. Its stock remains down nearly 40% this year and continues to trade at a discount to many of its cloud-based peers. Is it finally time for investors to take the contrarian view?
Salesforce operates the world's largest cloud-based customer relationship management (CRM) platform. It also provides additional cloud-based marketing, commerce, analytics, and data visualization services.
For many years, Salesforce benefited from the digitization of large businesses. It locked in its customers with sticky subscriptions and its own proprietary apps, and it repeatedly expanded by gobbling up smaller companies. Its business model remained resilient during the pandemic, which drove companies to accelerate their digital transformations and accommodate the shift toward hybrid and remote work.
That's why Salesforce's revenue and adjusted earnings per share (EPS) rose 24% and 65%, respectively, in fiscal 2021 (which ended on Jan. 31, 2021). In fiscal 2022, its revenue grew another 25%, but its adjusted EPS dipped 3% against its bigger investment-related gains in the previous year.
However, Salesforce's year-over-year revenue growth decelerated throughout the first three quarters of fiscal 2023 as it faced two major challenges.
First, macro headwinds caused large companies to rein in their spending and postpone big software deals. Second, the rising dollar -- which was bolstered by higher interest rates -- generated tough currency headwinds.
As a result, Salesforce expects its reported revenue to only rise 17% for the full year, as its adjusted EPS grows 3%. That slowdown isn't disastrous, but it raises some questions regarding the company's long-term goal of generating $50 billion in annual revenue in fiscal 2026. To achieve that goal, it would need to grow its top line at a compound annual growth rate (CAGR) of 17% between fiscal 2023 and 2026 -- which assumes its deceleration this year won't lead to a deeper slowdown.
But analysts aren't as optimistic. They expect Salesforce's revenue to rise 17% in fiscal 2023, 14% in fiscal 2024, and 16% in fiscal 2025. We should be skeptical of those expectations, but that slowdown could certainly occur if the current macro headwinds lead to a full-blown recession.
The bears will also point out that Salesforce still faces lots of competition from Microsoft's (MSFT 2.69%) Dynamics CRM, as well as Adobe's (ADBE 2.81%) e-commerce and marketing tools. They'll also claim that Salesforce's heavy dependence on acquisitions could "diworsify" its business and squeeze its margins. Co-CEO Bret Taylor's latest decision to leave Salesforce, which will leave founder Marc Benioff as the only CEO, raises additional questions regarding its future.
However, the bulls will argue that Salesforce's latest acquisitions -- including Tableau, Mulesoft, and Slack -- have increased the overall stickiness of its cloud-based ecosystem. They'll also claim that economies of scale are boosting its margins as it expands: Salesforce expects its adjusted operating margin to expand 200 basis points to 20.7% for the full year, and to exceed 25% by fiscal 2026.
Lastly, Salesforce's stock looks fairly cheap at 31 times next year's earnings and four times next year's sales. Its smaller healthcare-oriented CRM peer Veeva (VEEV 3.86%), which is growing at a similar rate, trades at 40 times forward earnings and 12 times next year's sales. ServiceNow (NOW 4.84%), the cloud-based digital workflow company which is growing slightly faster than Salesforce, trades at 43 times forward earnings and 10 times next year's sales. That's probably why the value-oriented activist hedge fund Starboard Value acquired a significant stake in Salesforce this October.
Salesforce will likely remain in the penalty box until the macro situation improves and its revenue growth accelerates again. That said, I'm still optimistic about Salesforce's long-term prospects as large companies continue to digitally optimize their operations.
Therefore, I believe Salesforce is still a good long-term investment at these levels -- but investors shouldn't expect the bulls to rush back until some of these near-term headwinds dissipate.
Leo Sun has positions in Adobe, Salesforce, and Veeva Systems. The Motley Fool has positions in and recommends Adobe, Microsoft, Salesforce, ServiceNow, and Veeva Systems. The Motley Fool recommends the following options: long January 2024 $420 calls on Adobe and short January 2024 $430 calls on Adobe. The Motley Fool has a disclosure policy.
Oaktree is a reputable Salesforce development company, today is pleased to announce the expansion of its Salesforce development services in USA, Australia, UAE.BANGALORE, KARNATAKA, INDIA, November 30, 2022 /EINPresswire.com/ -- Oaktree software a reputable Salesforce development company in India, today is pleased to announce the expansion of its Salesforce development services in USA, Australia as well as UAE.
This announcement we can say the biggest in the company's history—comes at a time of explosive internal growth, with its current Salesforce talent base exceeding 150+ Salesforce experts.
Oaktree software’s tremendous Salesforce development service growth in India has strengthened them to take such a company-growing decision. A strong quality system, a systematic plus transparent Salesforce development process, and a workforce of more than 150+ Salesforce professionals all contribute to the company's extensive experience
"Having served Salesforce-based business customers for seven years, this geographic expansion provides us with access not only to new markets and new customers but also to new ideas and new growth," said Ashish Sharma, CEO of Oaktree software.” As a reliable Salesforce-based service provider, it's a natural progression to accelerate our growth and scope of work, which benefits all of the businesses we serve."
The goal behind this announcement is to make it easier for their customers to access the company’s budget-friendly and quality-rich Salesforce implementation and development services across various regions.
The expansion of their Salesforce development solutions in USA, UAE, and Australia will empower them to respond effectively to the growing needs of the diverse customers willing to implement advanced Salesforce solutions in their business.
Looking forward to the growth of the company, Oaktree software strives to "become a preferred, profitable, and respected Salesforce consultation, development, and implementation company" in the world. The latest announcement of their presence in USA, UAE, and Australia is just one example of how Oaktree software is growing internationally and continuously catering to the needs of its global clients.
About Oaktree software
Oaktree software is a reputable and world-class Salesforce consultation and development company in India, USA, and UAE well known for providing business-oriented and market-centric Salesforce-based services at an economic cost.
Oaktree software provides a comprehensive suite of Salesforce development services that enable you to transform your business beyond the standard functionalities that include Salesforce Sales Cloud, Service Cloud, Marketing Cloud, Pardot, Community cloud, CPQ, Mulesoft, and Salesforce-based Mobile application or Salesforce AppExchange Apps and much more.
They have successfully delivered over 200+ Salesforce-based products, making them a top Salesforce development company in a cutthroat industry.
By offering scalable Salesforce implementation and development solutions for its clients, the company offers the best services for small, medium, and large businesses.
Oak Tree Software Pvt Ltd
+91 731 499 1873
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