On Friday, Deutsche Bank (ETR:DBKGn) maintained its Buy rating on Salesforce (NYSE:NYSE:CRM) stock and increased its price target to $365 from the previous $325. The firm's analyst cited Agentforce as a key driver for renewed interest in Salesforce's core offerings, contributing to bullish sentiment ahead of the company's third fiscal quarter results. The analyst noted that while there is excitement around the product, it is important for investors to temper expectations as it is still early, with limited customer proofs of concept (POCs) to date.
The analysis of Salesforce's core business for the upcoming quarter showed mixed signals, with strength observed in the Data Cloud and Einstein 1 Sales/Service, but also signs of aggressive tactics as the quarter ended. The stock's recent performance, with a 12% outperformance compared to the IGV since Dreamforce, could pose a more challenging setup for investors as the company's fundamentals may need time to align with the current narrative.
Despite these concerns, Deutsche Bank continues to recommend Salesforce shares. The analyst believes that Agentforce is at a turning point, potentially increasing Chief Information Officers' (CIOs) willingness to invest in Salesforce and justify their budgets. This is expected to support top-line growth exceeding 10%. With Salesforce trading at 23 times its expected value to unlevered free cash flow (EV/uFCF) for the calendar year 2025, the firm posits that the risk/reward balance favors a positive outlook over the next 12 months, prompting the price target increase.
The raised price target reflects confidence in Salesforce's growth prospects, as Agentforce is seen as a catalyst for further investment in the company's suite of products. Although the market sentiment may present challenges due to high expectations, the analyst's perspective suggests that Salesforce's strategic positioning could yield beneficial results for investors in the long term.
In other recent news, Salesforce saw an array of analyst adjustments. TD Cowen and Goldman Sachs raised their price targets for the company's shares to $340 and $360 respectively. Despite this, TD Cowen maintained a Hold rating, expressing a cautious outlook amid high expectations. Goldman Sachs, however, maintained a Buy rating, expressing confidence in the company's AI strategy. Scotiabank (TSX:BNS) also initiated coverage of Salesforce with a bullish Sector Outperform rating and a price target of $425.00. Erste Group upgraded Salesforce from Hold to Buy, citing consistent revenue growth and operating margin expansion.
Salesforce reported strong second-quarter earnings, with earnings per share of $2.56, an 8% increase in sales, and a 9% rise in subscription and support revenues. The company also acquired Zoomin and Own Company for $1.9 billion in cash and plans to hire 1,000 new employees to support Agentforce sales.
In terms of product innovation, Salesforce unveiled a suite of AI agent testing tools, including the Agentforce Testing Center, Sandboxes for Agentforce and Data Cloud, and monitoring tools for Agentforce. These tools are part of Salesforce's broader strategy to enable businesses to become "agent-first" enterprises, leveraging AI to augment their workforce.
These are recent developments that emphasize Salesforce's growth and diversification strategies, including the increased adoption of Agentforce and the expansion of Data Cloud.
InvestingPro Insights
Salesforce's recent performance aligns with Deutsche Bank's bullish outlook, as evidenced by InvestingPro data. The company's stock has shown impressive returns, with a 50.67% price total return over the past year and a strong 30.05% return in the last three months. This momentum is reflected in the stock trading at 96.25% of its 52-week high, supporting the analyst's positive stance.
InvestingPro Tips highlight Salesforce's financial strength, noting its "impressive gross profit margins" and that it "operates with a moderate level of debt." These factors contribute to the company's ability to invest in innovative products like Agentforce. Additionally, the tip that Salesforce is "trading at a low P/E ratio relative to near-term earnings growth" suggests potential upside, aligning with Deutsche Bank's increased price target.
For investors seeking a deeper understanding of Salesforce's position, InvestingPro offers 15 additional tips, providing a comprehensive view of the company's financial health and market performance.
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