As Salesforce Inc. gears up to report its fiscal first-quarter results, all eyes are on the company’s artificial intelligence (AI) products. The report, due on Wednesday after market close, will set the stage for the annual Dreamforce conference in September. However, market analysts caution that business spending may not be as robust as anticipated, which could potentially impact the company’s performance.
The tech giant has seen a 60% surge in stock value this year, according to JPMorgan analyst Mark Murphy, yet key metrics such as performance versus plan, expected practice growth, and booking expectations haven’t shown the same upward trend. Murphy notes that Salesforce’s recent price increases and the potential for a faster-than-expected adoption of its premium, monetized AI products could bolster its outlook for the year. Even so, the company was removed from JPMorgan’s Analyst Focus List due to the continued decline in key metrics.
Mixed Expectations Ahead of Salesforce Inc.’s Earnings Report
Salesforce Inc., a leading cloud-based software company, is slated to announce its fiscal first-quarter results on September 12-14, coinciding with the company’s annual Dreamforce conference. The company is expected to showcase its AI products in the earnings report. However, analysts express caution over the company’s performance due to lackluster business spending.
A Tale of Three Metrics
Mark Murphy, an analyst at JPMorgan, notes that while some metrics at Salesforce have shown improvement, three key metrics – performance versus plan, expected practice growth, and booking expectations – have been disappointing. Murphy stated that the lackluster performance of Salesforce has stretched over four consecutive quarters. Despite this, Murphy suggests two potential boosts for Salesforce: the recent price increases and the faster-than-expected adoption of its premium AI products.
Murphy has given an overweight rating on Salesforce’s stock and a $230 price target, although he removed Salesforce from JPMorgan’s Analyst Focus List due to the stock’s 60% gain on the year and a continued decline of key metrics.
Analysts Weigh In
Among the 51 analysts who cover Salesforce shares, 34 have buy-grade ratings, 15 have hold ratings, and two have sell ratings, with an average target price of $240.48, according to FactSet data. Wall Street analysts, on average, predict fiscal second-quarter earnings of $1.90 per share on revenue of $8.53 billion.
Stifel analyst J. Parker Lane is keeping an eye on price increases and the impact of new AI-centric products. He believes that Salesforce is well-positioned to deliver an upside to margin targets due to continued business efficiencies.
Looking Forward
Jefferies analyst Brent Thill anticipates close scrutiny of margins amid a sluggish sales environment. Thill expects commentary on restructuring and AI in the upcoming earnings report. He carries a buy rating and a base target price of $250 on Salesforce’s stock.
Meanwhile, Citi’s Tyler Radke provides a mixed view. He cites signs of improvement in new projects but is concerned about aggressive sales tactics and increased concerns around renewals.
Takeaways
The upcoming earnings report from Salesforce Inc. presents a mixed bag of expectations. Improvement in some metrics, potential for quicker adoption of AI products, and recent price increases offer optimism. However, continued underperformance in key metrics, sluggish sales, and concerns around renewals present challenges. It will be interesting to see how Salesforce navigates these mixed expectations in its upcoming fiscal report and beyond.
