On Thursday, Piper Sandler adjusted its outlook on Salesforce.com shares (NYSE:NYSE:CRM) shares, reducing the price target from the previous $300.00 to $250.00, while maintaining a Neutral rating on the stock.
The adjustment follows Salesforce's updated guidance indicating a slowdown in top-line growth to 7-8%, which is slightly below the two-year consensus of 9-10% growth. This revision is attributed to the impact of macroeconomic factors and foreign exchange headwinds.
The analyst noted that the initial optimism surrounding Salesforce's 9% price increase in August 2023 as a means to bolster growth this year had not materialized as expected.
The revised growth rates are also reflective of a broader trend within the Software as a Service (SaaS) industry, where growth rates are anticipated to moderate for the third consecutive year.
The revised price target is also influenced by a lower enterprise value to free cash flow (EV/FCF) target multiple, now set at 21 times compared to the prior 24 times. This change acknowledges the ongoing macroeconomic challenges that are expected to persist.
The reassessment by Piper Sandler comes in the wake of lowered guidance from Workday (NASDAQ:WDAY) last week, which, coupled with Salesforce's announcement, may contribute to increased uncertainty within the SaaS sector.
The firm's stance remains neutral, suggesting a wait-and-see approach for signs of stabilization in the market before changing its position on Salesforce.com shares.
InvestingPro Insights
In light of Piper Sandler's recent price target adjustment for Salesforce.com (NYSE:CRM), InvestingPro data shows a robust financial picture for the company. With a market capitalization of approximately $263.47 billion and a revenue growth of 11.18% in the last twelve months as of Q4 2024, Salesforce remains a significant player in the software industry. Despite the revised guidance, Salesforce's revenue for the same period stands strong at $34.86 billion, underlining its substantial market presence.
Two key InvestingPro Tips highlight that Salesforce has a perfect Piotroski Score of 9, indicating a healthy financial state, and the company is trading at a high earnings multiple with a P/E ratio of 63.87. These metrics suggest that while Salesforce is priced at a premium, its financials are solid. Additionally, the stock's low price volatility could appeal to investors looking for stability in the turbulent tech sector. For those considering an investment, the current picture coupled with the fact that analysts predict the company will be profitable this year, and it has been profitable over the last twelve months, may offer reassurance.
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