Despite CEO Change, Salesforce Analysts Say Sell-Off May Be Buying Opportunity

Salesforce.com, inc. CRM shares were falling Wednesday a day after the announcement that its co-CEO will step down, even as several sell-side analysts reiterated confidence and raised target prices on the stock.

Salesforce on Tuesday reported what several analysts called a strong quarter, including EPS and revenue beats, though it appeared to be overshadowed by the departure of co-CEO Keith Block in the minds of investors. 

Some analysts did lower earnings estimates, but said the CEO transition risk can be managed.

The Salesforce Analysts

Wells Fargo's Philip Winslow kept an Overweight rating and $215 price target on Salesforce while lowering earnings estimates.

Bank of America's Kash Rangan reiterated a Buy rating while raising the target price from $215 to $250.

Morgan Stanley's Keith Weiss kept an Overweight rating on the stock with a $225 price target.

Cowen's Derrick Wood reiterated an Outperform rating and raised the price target from $210 to to $220.

Takeaways On Salesforce

Analysts liked several metrics in the software company's print, including growth in bookings of 28%, well above estimates, and positives in remaining performance obligation and billings, as well as downward-trending revenue attrition. The acquisition of Vlocity, also announced Tuesday, was also seen as positive.

The company "has struck an attractive balance of growth and margin expansion and we see significant runway ahead for revenue/FCF scale," Wood wrote Wednesday.

BofA Sees Buying Opportunity

The market reaction, which appeared to reflect Block's departure, creates a "particularly attractive buying opportunity," Rangan said. And like several analysts, Rangan downplayed the overall effect of the management change, except as a positive.

"Strong quarter; execution risk can be contained," the analyst said. 

Other Reactions To Salesforce News 

Weiss: "Despite the departure of a key executive, Q4 results show Salesforce has the solutions, execution capability and market momentum to sustain 20%+ organic revenue growth and 25%+ FCF growth over the next several years."

Winslow: "Although we view the departure of a key executive such as Keith Block as a negative for the company, our overarching thesis that Salesforce’s integrated solution is its most differentiated advantage and the source of its continued growth and share gain within the CRM market remains unchanged."

Winslow boosted 2021 revenue estimates from $20.9 billion to just under $21.1 billion, but lowered expectations on EPS from $3.23 to $3.18.

CRM Price Action

Salesforce shares were trading down 0.99% at $179.48 at the time of publication Wednesday. 

Related Links:

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Salesforce Brings In Earnings Beats, Co-CEO Keith Block Steps Down

Photo courtesy of Salesforce.