There were a different stocks that made headlines recently. Perhaps the most notable company to make the news prior to the weekend was Salesforce (NYSE: CRM). The software company hit a record-high on Friday’s trading session as the markets reacted to good news from management. In particular, Salesforce’s chief executives said it expects 2022 to be an even better year than expected.
Salesforces was already having a pretty good year going into 2021, but the company managed to impress investors once again by upgrading its future guidance. The company said that it expects to generate up to $26.35 billion in revenue for the fiscal 2022 year, just a bit higher than the $26.3 billion previously expected. That extra $50 million in revenue certainly doesn’t seem like much at first glance, but the news was more than enough to impress Wall Street.
The company also said that its buyout of Slack, which happened back in July, is already generating more revenue than originally expected. For fiscal 2023, Salesforce is predicting closer to $31.8 billion in yearly revenue, which is significantly higher than its 2022 estimates.
A number of Wall Street analysts covering Salesforce ended up upgrading the stock based on this news. That includes Piper Sandler analyst Brent Braceline, who bumped Salesforce’s price target from $280 per share to over $365. Morgan Stanley analyst Keith Weiss also upgraded the stock from $305 to $345 on Friday. So did Bank of America analyst Brad Sills, whose milder bump from $320 to $330 was still noticeable. However, there were a few who felt this increase in optimism might be somewhat overdone.
“They raised guidance [less than] 1%. Keep in mind, they spent $28 billion for Slack, and I think that they were going to attribute, or they estimated, that that would bring $6 billion in new revenue to the company. So obviously some of that’s baked in, but I just think that the [stock move] is a little bit ridiculous for the raise that we’re seeing,” said analyst Quint Tatro according to CNBC.
At this moment, there isn’t a single analyst covering Salesforce that is bearish. In total, there are 41 analysts that are bullish and around seven that are neutral, but none think Salesforce will plummet in the long-term. The main concern is that the stock remains overpriced in the current market climate.
As inflation goes up, the general consensus is that value-based stocks will do better in this new market climate compared to small-margin, growth-based stocks. Higher inflation means less future growth, which is what growth companies are typically valued on.
Shares of Salesforce were up 2.8% on the guidance bump from management. Since the start of the year, the stock has risen around 29.7%, slightly outperforming the Nasdaq and S&P 500. The real question is whether Salesforce can fulfill its optimistic growth projections for the upcoming years.
Salesforce Company Profile
Salesforce.com provides enterprise cloud computing solutions, including Sales Cloud, the company’s main customer relationship management software-as-a-service product. Salesforce.com also offers Service Cloud for customer support, Marketing Cloud for digital marketing campaigns, Commerce Cloud as an e-commerce engine, the Salesforce Platform, which allows enterprises to build applications, and other solutions, such as MuleSoft for data integration. – Warrior Trading News
