On Wednesday, Evercore ISI maintained its Outperform rating and $330.00 price target for Salesforce.com (NYSE:CRM), anticipating a positive earnings report. The firm forecasts that the company will likely exceed first-quarter expectations modestly, particularly in subscription revenue, Current Remaining Performance Obligations (CRPO), and operating margins.
Salesforce is expected to deliver "beat and bracket" results, a term used when a company surpasses estimates and raises future guidance. The guidance for subscription revenue growth around 10%, adjusted for currency changes, is viewed as attainable, considering the CRPO's steady performance in recent quarters. Observations from Salesforce's recent World Tour event also suggest potential modest increases in initial subscription revenue and CRPO forecasts.
Evercore ISI predicts that Salesforce's first-quarter results will reinforce the company's narrative of "profitable growth." While no significant adjustments to the full-year guidance are anticipated following the first-quarter earnings call, as this is not Salesforce's usual practice, the firm still sees Salesforce as a "compounder," with expectations for both revenue growth and margin improvement.
The analysis points to a combination of low double-digit growth and an increase of more than 200 basis points in operating margins as factors that could drive the stock's performance. With Salesforce trading at approximately 20 times its expected free cash flow for the 2025 calendar year, Evercore ISI believes the risk/reward profile is favorable looking ahead over the next three to six months.
InvestingPro Insights
As Salesforce (NYSE:CRM) approaches its earnings report, InvestingPro data indicates a robust financial position. The company boasts a significant market capitalization of $261.74 billion, reflecting its substantial presence in the industry. With a notable revenue growth of 11.18% over the last twelve months as of Q4 2024, Salesforce demonstrates its ability to expand its financial base in a competitive market. This growth is complemented by a high gross profit margin of 75.5%, showcasing the company's efficiency in managing its cost of goods sold.
From an investment standpoint, two InvestingPro Tips highlight Salesforce's market behavior and valuation. The company trades with low price volatility, which suggests a degree of stability in its stock price. However, it's trading at a high earnings multiple with a P/E ratio of 63.17, indicating that investors may expect significant future growth. For those considering investing in Salesforce, it's worth noting that the company is a prominent player in the Software industry, and analysts predict it will be profitable this year, having been profitable over the last twelve months.
For investors seeking more in-depth analysis and additional InvestingPro Tips, there are 11 more tips available at Investing.com/pro/CRM. Enhance your investment strategy with a yearly or biyearly Pro and Pro+ subscription, and don't forget to use the coupon code PRONEWS24 for an additional 10% off.
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