Shares of the enterprise software company Salesforce (NYSE:CRM) have gained over 81% in one year. Despite this notable appreciation in its value, Robert W. Baird analyst Robert Oliver believes that CRM has more room to run due to its low valuation and focus on margin expansion. The five-star analyst upgraded Salesforce stock to Buy from Hold on January 11 and increased the price target to $300 from $240, implying 10.55% upside potential from current levels.
The analyst highlighted that Salesforce’s commitment to expand margins led to a rally in its share price. The company turned towards driving efficiency and margins amid macro headwinds. Thanks to its focus on delivering profitable growth, CRM’s adjusted operating margin expanded by 850 basis points in Q3 FY24. Moreover, the company again (for the third time in FY24) increased its full-year operating margin guidance. It now expects to deliver an operating margin of 30.5% in FY24, up from its previous forecast of 30%.
While CRM stock has witnessed solid growth, the analyst said its valuation is near historical lows. Notably, CRM stock has a forward price-to-earnings multiple of 32.20, which is lower than its five-year average of 48.36. Aside from the low valuation, the analyst expects the company to benefit from its ability to increase pricing, higher enterprise spending, and solid sales execution.
What is the Future Outlook for Salesforce?
While Oliver is bullish about Salesforce stock, Wall Street is cautiously optimistic about the company’s prospects (based on analysts’ consensus rating).
CRM stock has 27 Buys, 10 Holds, and one Sell recommendation for a Moderate Buy consensus rating. Analysts’ average price target of $283.29 implies a limited upside potential of 4.39% from current levels.
