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Salesforce ended fiscal 2024 on a strong note as the enterprise software giant continued to deftly balance revenue and profit growth. The company has also stepped up its share buyback program, and management has paid its first-ever dividend. This shows confidence in the business. We are still believers. According to estimates compiled by LSEG (formerly Refinitiv), sales for the three months ending January 31 rose 11% year-on-year to $9.29 billion, exceeding analysts’ expectations of $9.22 billion. Ta. Adjusted earnings per share were $2.29, up 36% for the year and beating analysts’ expectations of $2.26, according to LSEG data. Adjusted operating margin expanded to 31.4% in the quarter, below expectations of 31.55%, according to FactSet. On a GAAP basis, operating margin for the quarter was 17.5%, below expectations of 18%. GAAP stands for Generally Accepted Accounting Principles. The stock initially fell more than 5% in after-hours trading as expectations rose and fiscal 2025 revenue estimates were slightly lower than expected. But by the end of the conference call, the stock had erased those losses and rose slightly, but was back in the red. For better or worse, Thursday was a pretty strong day for Salesforce. The company’s stock had risen nearly 14% this year through Wednesday’s close after nearly doubling in 2023. We believe that further increases are expected in the future. CRM 1Y Mountain Salesforce stock performance over the past 12 months. Conclusion Were the results perfect? No, but it was a strong quarter overall for Salesforce, with the company outperforming in most key metrics. Although operating margins were slightly below Wall Street’s lofty expectations, the year-over-year expansion was significant and is a testament to the transformational management the company has achieved over the past year in response to activist investors seeking improved profitability. Rather than rant about small mistakes in the margins, I’d rather focus on the direction it’s headed. And the numbers are even higher, with CEO Marc Benioff & Co. predicting fiscal year 2025 will be another year of margin expansion. The external narrative surrounding the quarter is that while there may be some inaccuracies in the earnings guide, the broader trading environment, plagued by measured spending and a longer sales cycle lasting two years, has improved. What would happen if? After all, Salesforce executives say they’re seeing “green shoots” in certain areas, as all customers want to find ways to leverage AI to increase productivity. Certainly, it’s possible that the company’s sales growth guidance turns out to be conservative. This balance of margin expansion and the potential for rapid revenue growth is why we continue to think Salesforce is a company to own for at least the next few years. Valuation is similarly unimpressive for a stock trading at roughly 31 times forward estimates despite earnings per share growth of nearly 20%. If stocks fall on Thursday and then fall in the days or weeks that follow, we would view that as a buying opportunity. We maintain a “2” rating on Salesforce stock and raise our price target from $320 to $340 per share. Quarterly Commentary Salesforce continues to see strong adoption of the so-called “full cocktail” of clouds, with eight of its top 10 deals in the quarter involving six or more clouds, Reported as 5 units. Also, at Salesforce, in fiscal year 2024 he saw an 80% increase in transactions of more than $10 million. Regional sales, excluding currency effects, increased 10% year over year in the Americas and 12% in EMEA (Europe, Middle East and Europe). Africa) and 22% in Asia-Pacific (APAC). In an earnings call, Chief Financial Officer Amy Weaver touted strong growth in new businesses in Latin America, India and Canada, while hinting that parts of EMEA were being held back. At the same time, Salesforce’s sales decline rate was about the same as in recent quarters, just over 8%. This is notable considering his 9% price increase the company implemented in August, his first list price increase in seven years. Relatively low turnover rates indicate that customers are reluctant to leave Salesforce’s software and are willing to pay higher prices when their contracts come up for renewal. By cloud sector, the biggest positive surprise this quarter came from Data Cloud, a real-time customer data platform comprised of analytics (via the Tableau acquisition) and integration (via the MuleSoft acquisition). It’s too surprising to see outperformance here. As Benioff explained last quarter, growing interest in AI is driving new demand for this cloud. In fact, the company says Data Cloud has become its fastest growing product to date. This is powered by AI through MuleSoft’s integrated technology to help customers unlock data locked away across legacy systems, cloud apps, and devices. Tableau helps customers better understand their data and make data-driven decisions. The company also expects to see a wave of interest in its conversational AI chatbot, Einstein Copilot, which was made publicly available on Tuesday. Cash flow continues to increase faster than expected. For the three months ended Jan. 31, operating cash flow rose 22% annually to $3.4 billion, while free cash flow rose to $3.25 billion from $2.57 billion in the same period last year. This strong cash generation allowed Salesforce to repurchase enough stock to manage the dilution associated with stock-based compensation. Salesforce repurchased $7.7 billion worth of stock in fiscal 2024, reducing its diluted share count by approximately 1 million shares to 983 million shares. Of course, we would like to see the number of shares decrease further to increase our ownership and increase our earnings per share, but we are still hopeful that management maintains a serious approach to dilution. I’m happy. Steady stock buybacks are expected to continue this fiscal year as authorized amounts increase by $10 billion. Salesforce’s cash returns to shareholders are also no longer limited to stock buybacks. The company began paying its first-ever quarterly dividend of 40 cents per share. The annualized yield on the stock is approximately 0.50%. This won’t be enough to attract the attention of yield-seeking investors, but the stock will look more attractive to investors and funds that need dividends as part of their strategy. Salesforce joins the club of influential technology companies with Meta Platforms in announcing a dividend this earnings season. Guidance According to FactSet, Salesforce expects full-year 2025 total sales to increase 9% year over year to $37.7 billion to $38 billion, slightly below expectations of $38.65 billion. said. However, there could be upside potential if trading conditions continue to improve and more customers seek adoption of Data Cloud and Einstein Copilot. Full-year GAAP operating margin is expected to expand to 20.4% from 14.4% in fiscal 2024, beating analysts’ expectations of 18.6%, according to FactSet. Meanwhile, adjusted operating margin is expected to expand to approximately 32.5% in fiscal 2025, from 30.5% in the same period last year and the highest estimate of approximately 32%, according to FactSet. Despite the slightly softer sales outlook, Salesforce was able to beat Wall Street’s expectations for full-year earnings due to expected strong profit margins. The company said adjusted EPS will be $9.68 to $9.76, compared with expectations of $9.61, according to FactSet. Salesforce expects first-quarter sales of $9.12 billion to $9.17 billion, in line with expectations of $9.15 billion. Meanwhile, adjusted EPS guidance is $2.37 to $2.39, well above expectations of $2.20, according to FactSet. Salesforce’s current remaining performance obligations are expected to increase 11% year-over-year, above the expected increase of approximately 9.6%. This metric represents future revenue under a contract that will be accrued over the next 12 months. (Jim Cramer’s Charitable Trust is long CRM and META. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investing Club, trade before Jim Cramer makes trades. Receive alerts. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in a charitable trust’s portfolio. 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A sign posted at Salesforce headquarters on February 28, 2024 in San Francisco, California.
Justin Sullivan | Getty Images
sales force The enterprise software giant continued to deftly balance revenue and profit growth, ending fiscal year 2024 on a strong note. The company has also stepped up its share buyback program, and management has paid its first-ever dividend. This shows confidence in the business. We are still believers.
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