Salesforce stock (NYSE:CRM) has lost about 41% YTD, compared to the 20% drop in the S&P500 over the same period. Further, at the current price of $150 a share, it is trading 33% below its fair value of $224 – Trefis’ estimate for The valuation of Salesforce. The company surpassed consensus estimates in the second quarter of FY 2023 (FY Feb-Jan), with sales up 22% yoy to $7.72 billion. This was due to a 21% increase in subscription and support revenues and a 35% increase in professional services and other revenues. Growth in the subscription and support segment was driven by a 15% increase in sales cloud, 14% in service cloud, 17% in marketing & commerce cloud, a 53% jump in platform and others and a 12% increase in data sub segments. Notably, the Platform & Other division includes a $376 million contribution from Slack Technologies. On the other hand, GAAP net income declined 87% yoy to $68 million, primarily due to higher operating expenses as a percentage of sales and lower profits on strategic investments.
The company’s revenue increased 23% yoy to $15.1 billion in the first half of FY 2023. It was primarily driven by a 54% growth in platform and others, followed by a 16% increase in both sales – as the service cloud division. On the cost front, revenue and operating expenses increased in the first half of the year. Furthermore, profit on strategic investments decreased from $814 million to $52 million. All in all, this led to a 90% yoy decline in adjusted net income to $96 million.
Going forward, CRM has lowered its revenue forecast for the third quarter due to a difficult macroeconomic scenario. It expects third-quarter revenue to remain between $7.82 and $7.83 billion. All in all dear Trefis The Revenues of Salesforce to hit $31.06 billion in FY2023. In addition, CRM’s revenue per share is likely to remain around $30.94. This coupled with a P/S multiple of just over 7x will lead to a valuation of $224.
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