Market “does not fully appreciate our commitment to growth and margins”
Salesforce President and Co-CEO Marc Benioff and his team are serious about expanding profit margins after years of making major acquisitions of Mulesoft, Tableau and Slack.
“For us, I think the market doesn’t fully appreciate how committed we are to growth and margins,” Benioff told Yahoo Finance Live at the software giant’s Dreamforce conference in San Francisco before he raised a number of the company’s recent initiatives.
Benioff also didn’t rule out big deals in the future, echoing Salesforce co-CEO Brett Taylor’s sentiment, but he noted two ambitious goals the company announced at the conference.
Salesforce has committed to a 25% operating margin by calendar year 2025, the first time Salesforce has committed to an overall operating margin target. If achieved, it would represent a marked increase from the 2022 target of 20.4%.
The company also expects sales to reach $50 billion by 2025, a significant increase compared to Wall Street’s estimate of $31 billion for this year.
“We want to increase our revenue,” Benioff said. “We want to increase our margins. We want to increase our market share. We want to increase our customer success levels. We want to bring people together. Everything is connected.”
In general, investors on the ground at the conference responded positively to the news.
“A faster pace of product innovation, more detailed views of significant opportunities within the customer base, strong commitments to improving efficiency, and a growing focus on shareholder value suggest a compound annual growth rate of 25% + EBIT and work to improve investor confidence in those goals,” Keith wrote. Weiss, an analyst at Morgan Stanley, in a note to clients.
Weiss added that Salesforce has shown “solid progress on the path to rebuilding investor credibility.” “On Investor Day 2022, the Salesforce management team took the investor discussions firsthand, and addressed well the core areas of interest.”
Weiss reiterated the overweight rating equivalent to buying a Salesforce stock with a $273 target.
Goldman Sachs analyst Cash Ranjan also wrote an upbeat note about Salesforce after his stint at Dreamforce. The analyst predicts that Salesforce’s operating margins could top 30% by calendar year 2026.
Brian Suzy It is a comprehensive editor and Announcer at Yahoo Finance. Follow Suzy on Twitter Tweet embed and on LinkedIn.
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