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Salesforce Falls After Earnings as Analysts Scale Back Expectations

Salesforce falls after a more-cautious tone on future growth prompts several analysts to lower their one-year price targets.

Salesforce  (CRM)  shares fell Friday after the software sales-tracking giant reported solid fourth-quarter earnings but cautioned on future growth due to its integration of Slack  (WORK) , prompting several analysts to lower their one-year price targets.

Salesforce on Thursday reported fourth-quarter sales of $5.82 billion, up 20% from a year earlier, and said it sees first-quarter revenue closing in on $5.9 billion, more than analysts' forecasts. It also said it expects adjusted earnings of between 88 cents and 89 cents a share.

For fiscal 2022, however, the company said it expects adjusted earnings of between $3.39 and $3.41 a share, below Wall Street estimates of $3.49, prompting some analysts to strike a more cautious tone and lower their price targets on the stock.

Piper Sandler analyst Brent Bracelin trimmed his one-year price target to $240 from $242 and left his neutral rating in place, noting that he sees fiscal 2022 as a “year of digestion” with little to no improvement in margins as Salesforce integrates its acquisition of Slack.

Salesforce agreed in December to buy Slack for $27.6 billion. The acquisition is expected to close during the company’s fiscal second quarter. 

BMO analyst Keith Bachman also trimmed his one-year price target, lowering it to $280 from $285 on expectations that improvements in fiscal 2022 and bookings guidance “… may prove to be conservative, given a better demand environment.” He kept his outperform rating in place.

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Wedbush Securities' Dan Ives said in his own research note that while dilution from the Slack deal and general worries about "this M&A poker move" have fueled some concerns over Salesforce's margin profile, "... we strongly believe this was the right move at the right time for CRM."

Ives held his $300 price target and outperform rating.

Jim Cramer and the Action Alerts PLUS team also took a more optimistic long-term tack, noting that when it comes to M&A and forward-thinking in enterprise software, “… we have learned to never bet against (Salesforce founder and CEO Marc) Benioff."

“We continue to believe the market is underappreciating the Slack deal,” the AAP team wrote. "Even in a pandemic, Salesforce continues to consistently deliver 20% year-over-year sales growth and their industry-leading software is one of the biggest reasons why their customers have remained successful in a digital, work-from-anywhere environment.” 

At last check, shares of Salesforce were down 3.08% at $224.25.

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