Salesforce emerging as a ‘quality’ GARP stock

By Sam Boughedda

BofA Securities analysts lifted the firm’s price target on Salesforce (NYSE:) to $200 from $180 per share, telling investors Monday that it is emerging as a “quality” Growth at a Reasonable Price (GARP) stock.

However, analysts, who maintained a Buy rating on CRM, did lower the FY24 revenue estimate.

“Partner commentary suggests fairly muted Q4 activity, not surprising given disruption from recent restructuring. Still, most partners cited inline results against lower expectations,” wrote analysts. “While commentary suggests largely stable Commerce and Marketing Cloud activity in Q4, we did note some slowdown in pipeline builds for these offerings in a somewhat more heightened competitive environment.”

BofA expects Q4 revenue and cRPO growth to be largely in line with its estimates for 11% cc and 10% cc, respectively, with “perhaps modest upside to reported growth from currency.”

Even so, the analysts state that CRM is on the path for consistent 30%+ annual FCF growth.

“While partners suggest some waning FY24 pipeline visibility, most cited pipeline growth, consistent with Q4 deal activity. We expect guidance for FY24 rev growth to be consistent with Q4 cRPO level of 10% cc. We are lowering our FY24E rev est to $33.96bn (+10%, +9% cc) from $34.2bn,” analysts explain. “We continue to believe that Salesforce is emerging as the next quality GARP stock in software.”

Salesforce shares are up more than 1% so far on Monday.