Morgan Stanley (MS) analyst Keith Weiss kept a Buy rating on Salesforce (CRM) stock and raised the price target to $404 (implying 52.2% upside) from $393, despite investor concerns following its Q1 earnings report. While earnings met estimates, the five-star analyst said that the market’s negative reaction reflects concerns about core performance, margins, and Agentforce growth.
Confident Investing Starts Here:
- Easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions
- Receive undervalued, market resilient stocks right to your inbox with TipRanks' Smart Value Newsletter
In Q1, the operating margin of 32.3% was slightly below Street estimates of 32.6%. However, the analyst noted that since Q1 is usually weaker, margins might rise later in the year. Also, Weiss believes the company’s decision not to lift margin guidance, despite currency benefits, suggests a cautious outlook on future profits.
Also, the Top analyst said that Salesforce is investing in growth areas, like Agentforce and Data Cloud, hiring more sales staff to drive revenues. The company’s aim to improve efficiency using staff changes is impressive.
Analyst Sees Valuation Upside
If CRM achieves double-digit year-over-year growth while maintaining modest margin expansion, it could drive steady free cash flow growth. Weiss estimates that the stock, currently trading at a mid-teens EV/FCF multiple, has room for valuation expansion toward the low 20x range, offering potential upside for investors.
Is CRM a Buy, Sell, or Hold?
Turning to Wall Street, CRM stock has a Moderate Buy consensus rating based on 31 Buys, nine Holds, and three Sells assigned in the last three months. At $349.93, the average Salesforce stock price target implies a 31.86% upside potential.
