Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 26 Feb, 25 | CRM | Buy | USD 305.88 | USD 321.36 | USD 333.41 | 36 days | 9.0% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
Salesforce, Inc. provides Customer Relationship Management (CRM) technology that brings companies and customers together worldwide. The company's service includes sales to store data, monitor leads and progress, forecast opportunities, gain insights through analytics and relationship intelligence, and deliver quotes, contracts, and invoices; and service that enables companies to deliver trusted and highly personalized customer service and support at scale. In addition, its platform offering comprise a flexible platform that enables companies of various sizes, locations, and industries to build business apps with drag-and-drop tools; online learning platform that allows anyone to learn in-demand Salesforce skills; and Slack, a system of engagement. The company's marketing services enables companies to plan, personalize, and optimize customer marketing journey and real time personalization and optimization; and commerce services, which empowers shopping experience across various points of commerce, such as mobile, web, social, and stores and provides click-to-code tools that offers customers to build and deploy solutions. Further, its analytics offering includes Tableau, an end-to-end analytics solution for range of enterprise use cases and intelligent analytics with advanced AI models, spot trends, predict outcomes, timely recommendations, and take action from any device; and integration service including MuleSoft, an easy to connect data from any system to deliver connected experiences. Additionally, the company provides genie customer data cloud, a hyperscale real-time data platform that powers the customer 360 platform; vertical services to meet the needs of customers in industries, such as financial services, healthcare and life sciences, manufacturing and others; and offers salesforce easy for small and medium-sized businesses. Salesforce, Inc. was incorporated in 1999 and is headquartered in San Francisco, California.
Improved Profitability: The company achieved a GAAP operating margin of 20.0% (up 280 basis points Y/Y) and a non-GAAP operating margin of 33.1% (up 190 basis points Y/Y). Additionally, operating cash flow increased by 29% Y/Y, reaching $1.98 billion, and free cash flow grew by 30% Y/Y to $1.78 billion.
Strong Revenue Growth: Salesforce reported total revenue of $9.44 billion, marking an 8% Y/Y increase in both reported and constant currency terms. Subscription and support revenue grew by 9% Y/Y, indicating consistent demand for its core business offerings.
Foreign Exchange (FX) Headwinds: Salesforce expects $100 million in FX-related revenue losses for the full fiscal year FY25, with a $25 million Y/Y FX impact projected for Q4 FY25, potentially dampening top-line growth.
Losses on Strategic Investments: The company incurred $(0.17) per share in GAAP losses and $(0.18) per share in non-GAAP losses due to declines in strategic investments, negatively impacting overall net income per share.
Key investment risks for Salesforce include foreign exchange volatility impacting revenue, potential slowdowns in subscription growth, execution risks in AI-driven initiatives like Agentforce, and losses from strategic investments affecting profitability.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 305.88 | 266.12 | 321.36 | 333.41 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Salesforce Reports Strong Third Quarter Performance
Salesforce delivered a robust financial performance in the third quarter, reporting revenue of $9.44 billion, reflecting an 8% year-over-year (Y/Y) growth both as reported and in constant currency (CC). Subscription and support revenue accounted for $8.88 billion, increasing 9% Y/Y in both reported and CC terms. The company’s GAAP diluted net income per share stood at $1.58, while non-GAAP diluted net income per share was $2.41, both impacted by losses on strategic investments amounting to $(0.17) and $(0.18), respectively.
Operating Margins and Cash Flow Growth
Salesforce continued its disciplined focus on profitability, achieving a GAAP operating margin of 20.0% and a non-GAAP operating margin of 33.1%, reflecting increases of 280 and 190 basis points Y/Y, respectively. Operating cash flow reached $1.98 billion, representing a 29% Y/Y growth, while free cash flow stood at $1.78 billion, increasing by 30% Y/Y. The company remains committed to returning capital to shareholders, with $1.2 billion allocated to share repurchases and $0.4 billion distributed as dividend payments, totaling $1.6 billion in cash returned during the quarter.
Remaining Performance Obligations and Future Outlook
The company’s current remaining performance obligation (cRPO) grew by 10% Y/Y, reaching $26.4 billion, highlighting strong forward-looking revenue visibility. Salesforce continues to experience sustained demand for its solutions, positioning itself for continued expansion in the enterprise software market.
Fourth Quarter and Full-Year FY25 Guidance
Salesforce has initiated its fourth-quarter FY25 revenue guidance in the range of $9.90 billion to $10.10 billion, reflecting an expected Y/Y growth of 7% to 9%. Additionally, the company raised the lower end of its full-year FY25 revenue guidance, now projecting revenue between $37.8 billion and $38.0 billion, representing 8% to 9% Y/Y growth. Subscription and support revenue is anticipated to grow slightly below 10% Y/Y and approximately 10% in CC.
Profitability and Cash Flow Expectations for FY25
The company has revised its full-year FY25 operating margin guidance upward, projecting a GAAP operating margin of 19.8% and a non-GAAP operating margin of 32.9%. Furthermore, Salesforce raised its full-year FY25 operating cash flow growth outlook to a range of 24% to 26% Y/Y. The guidance also includes expected foreign exchange impacts, with a projected $100 million negative impact on total revenue for FY25.
Strategic Vision and Leadership Commentary
Chair and CEO Marc Benioff emphasized Salesforce’s leadership in AI-driven enterprise transformation, particularly through Agentforce, an AI-powered system integrated into the Salesforce Platform. He highlighted the rise of autonomous AI agents as a revolutionary force reshaping industries and global labor markets. President and CFO Amy Weaver reiterated the company’s commitment to profitable growth, citing the firm’s expanding margins and sustained shareholder returns, which now exceed $20 billion in total capital returned to investors.
Considering recent key business, financial updates, current trading levels, and key business risks, a ‘Buy’ recommendation has been given on Salesforce, Inc (NYSE: CRM) at the closing market price of USD 305.88, as on February 25, 2025.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Technology Industry: Software - Application
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| CRM Salesforce.com Inc |
10.87 4.34% | 261.35 | 100.89 | 27.47 | 7.42 | 4.34 | 7.44 | 26.81 |
| SAPGF SAP SE |
-0.64 0.24% | 269.87 | 76.28 | 22.88 | 5.61 | 3.84 | 5.59 | 26.18 |
| SAP SAP SE ADR |
2.52 0.93% | 274.00 | 75.80 | 22.37 | 5.62 | 3.75 | 5.51 | 25.79 |
| INTU Intuit Inc |
10.87 1.82% | 606.92 | 55.56 | 32.68 | 11.28 | 10.07 | 11.62 | 40.11 |
| NOW ServiceNow Inc |
111.05 13.66% | 923.75 | 90.12 | 54.95 | 16.85 | 19.81 | 16.58 | 100.69 |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is February 25,2025. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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