Salesforce.com (CRM)

The first ‘Cramer pick’ we’re looking at is Salesforce, a name that won’t need much introduction. Salesforce is a long-time industry leader in the realm of Customer Relationship Management (the source of the company’s CRM stock ticker), and offers a wide range of cloud-based software solutions for enterprise customers. Salesforce has made good use of the Soft-as-a-Service subscription model, and the company’s earnings and revenues have both been climbing so far this year, even as the stock itself has lost some 40%.

In its last reported quarter, the fiscal quarter 2Q23 ending on July 31, Salesforce reported a 22% year-over-year gain in top line revenues, to a total of $7.7 billion. At the bottom line, the non-GAAP EPS of $1.19 was down y/y, from $1.48, but was up sequentially. In fact, non-GAAP EPS rose through all of fiscal 1H23, from its low point of 84 cents in fiscal 4Q22.

During the quarter, Salesforce moved to support its share price through a share repurchase program. This marks the first time that the company has taken such a move, and it is substantial. The Board authorized share repurchases up to $10 billion. The company currently has $6.9 billion in cash and cash equivalent assets on hand. The company will report its third quarter fiscal year 2023 results on this coming November 30.

Salesforce has a solid base in its industry, and survey of more than 3,500 customers, reported on earlier this month, showed that companies using Salesforce products are saving an average of 25% on IT costs. Along with that, the survey indicated that customers are also seeing significant increases in employee productivity.

Writing for Macquarie Research, 5-star analyst Sarah Hindlian-Bowler puts Salesforce’s advantages into context: “Today, global challenges require businesses to digitally transform while leveraging customer data to become more responsive, resilient, and efficient. Companies also must rethink and alter how and where their employees work. As a result, we are seeing businesses in virtually every industry looking to optimize for a digital-first customer, employee, and partner experience and connect with their customers through digital channels. We believe that Salesforce remains one of a handful of key beneficiaries of businesses needing to digitalize…”

Standing squarely in the bull camp, Hindlian-Bowler rates CRM an Outperform (i.e. Buy), and her $210 price target suggests that a one-year gain of 38% lies ahead for the stock.

Big-name cloud tech has no trouble attracting attention from the Street’s analyst corps, and Salesforce has 36 recent analyst reviews on file. These include 29 Buys against just 7 Holds, for a Strong Buy consensus rating. The shares are selling for $152.08, and their $216 average price target is slightly more bullish than the Macquarie view, implying a 42% gain on the one-year horizon.