Salesforce Upgraded but Macro Weakness Will Likely Persist – Guggenheim
2022.09.02 18:49
Salesforce (CRM) Upgraded But Macro Weakness Will Likely Persist – Guggenheim
By Sam Boughedda
Shares of Salesforce (NYSE:CRM) were upgraded to Neutral from Sell, with its price target unchanged at $150 per share by a Guggenheim analyst on Friday.
The analyst explained they are upgrading the stock based on “a 20% decline since our 8/11 initiation, vs. the S&P 500 down 7% and IGV down 12%.”
“We maintain our view that CRM’s New ACV has been more modest than most investors realize, and it has relied on M&A to prop up rev growth, resulting in consistently near-zero FCF growth. We have viewed the $50B rev target in FY26 as risky and perhaps unattainable now following recently lowered FY23 rev guidance due to broad-based macro weakness. That is unless CRM continues its acquisition spree (which may be dilutive to shareholder value) or commits to material FCF improvements at the expense of lower, albeit acceptable, LT growth targets (closer to 10% than 20%),” added the analyst.
He added that macro weakness will likely persist at least through FY23, with management attributing its previously tempered forecast to signs of macro weakness that are “already manifesting in elongated deal cycles and deal compression in both enterprise customers and most discretionary spending among SMB customers.”
