The market may not have been impressed with first-quarter earnings from Salesforce.com, Inc. (NYSE:CRM), as a rise in capital expenses overshadowed revenue and earnings beats, but analysts at Wedbush are.
In a note on Thursday, the broker confirmed its ‘Outperform’ rating on the stock and raised its 12-month price target to $240 from $230 “reflecting increased confidence in the name.”
The Wedbush analysts noted strong top and bottom-line beats and an impressive operating margin of 27.6%, above the Street estate of 25.8%.
“Across all financial metrics, Salesforce posted solid results with the highlighted RPO number of $46.7 billion (up 11% y/y) slightly below whisper expectations,” the analysts wrote.
While Salesforce is still battling through various headwinds, the analysts said its 1Q performance was a testament to the company’s resilience, crushing the margin and expense profile story, continuing new investments in the shift to artificial intelligence (AI), and providing a solid guide for the year.
“Overall despite the head-scratching knee-jerk stock weakness after hours post-print, we view CRM as a table pounder at current levels and remains one of the most compelling software names to own in this backdrop with (CEO Marc) Benioff & Co. now on the offensive instead of the defensive (last 6 months),” the analysts said.
In particular, they highlighted Salesforce doubling down on the AI front regarding its product offering with the goal to integrate artificial intelligence and generative AI into numerous areas in its product base.
“For now, Salesforce remains laser-focused on its expense management, core innovations, productivity improvements, and profitable growth improvements,” the analysts concluded.
The company’s shares traded 4% down at $214.47 shortly after midday on Thursday.
Contact the author at stephen.gunnion@proactiveinvestors.com