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    HomeTechSalesforce rallies as profitability push pays off

    Salesforce rallies as profitability push pays off

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    Shares of Salesforce jumped 5% following the release of its strong earnings report, indicating that cost cuts were effective and demand was holding steady amidst a turbulent economy. The company, known for its workplace messaging platform Slack and data analytics tool Tableau, saw its market value increase by approximately $10 billion, based on its premarket share price of $227. Salesforce stocks have climbed over 60% thus far in 2023.

    The business software firm raised its annual forecast for adjusted operating margin from 28% to around 30%, with CFO Amy Weaver emphasizing that this new figure “is a floor, not a ceiling”. This move was commended by Wall Street analysts, who noted the benefits from the company’s focus on profitability rather than solely expanding through acquisitions.

    In response to pressure from activist investors earlier this year, Salesforce, led by Marc Benioff, has implemented measures such as laying off employees, reducing office space, and cutting down on employee perks in order to improve profitability, which has historically lagged behind its competitors.

    “The ceiling is the roof” for margins, according to analysts at Raymond James, among the 20 brokerages that raised their price targets on Salesforce stock. The median price target is now $253, nearly 18% higher than the stock’s previous closing price, according to Refinitiv data.

    The company’s latest financial report also alleviated concerns about slowing growth. While second-quarter revenue rose by 11%, significantly slower than the historical growth rates of 20% to 30%, it exceeded Wall Street expectations. Moreover, Salesforce raised its annual revenue forecast.

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    In an effort to navigate the downturn in tech spending, the company has introduced a range of artificial intelligence features and increased prices for the first time in seven years.

    Raymond James noted that the report should enhance investor confidence in Salesforce, stating that the company is executing well in a challenging economic climate and that its shares are undervalued. Salesforce currently trades at 25 times its forward 12 months earnings estimates, compared to the industry median of 15.14.

    Aditya Soni reporting in Bengaluru; Editing by Shounak Dasgupta



    Credit: The Star : Tech Feed

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