Salesforce (NYSE: CRM) is scheduled to report its fiscal Q1 2023 results on Tuesday, May 31 (after market close). We expect Salesforce to edge past the consensus estimates of revenues and earnings. The company, a market leader in customer relationship management (CRM) technology, posted better than expected results in the last quarter, with total revenues of $7.33 billion – up 26% y-o-y. The growth was driven by a 25% jump in the subscription & support revenues, followed by a 46% increase in the professional services stream. Notably, the firm derives more than 90% of the total revenues from subscription & support, which largely benefited from growth in sales, service, and platform & other sub-categories. We expect the same trend to continue in the first quarter (Note – Salesforce’s FY’22 ended on January 31, 2022. Q1 FY’23 refers to the quarter that ended on April 30, 2022).
Our forecast indicates that Salesforce’s valuation is $299 per share, which is 84% above the current market price of just above $162. Our interactive dashboard analysis on Salesforce’s Earnings Preview has more details.
- Salesforce Stock Gained 17% In A Week, What To Expect?
- Salesforce Stock Gained Almost 2% In One Week, What To Expect?
- Forecast Of The Day: Salesforce Cloud-Based CRM Revenue
- Salesforce.com’s Stock To Rise After Recent Fall?
- Should You Enter Salesforce.com’s Stock After Its Fall Last Month?
- Salesforce.com’s Stock Fell By 13% Last Month, What Next?
(1) Revenues expected to marginally beat the consensus estimates
Salesforce’s revenues increased 25% y-o-y to $26.5 billion in FY 2022. The growth was due to a 23% rise in subscription & support, followed by a 44% jump in the professional services & other streams.
- The subscription & support could be further divided into Salesforce CRM (includes sales cloud, service cloud, and marketing cloud) and cloud services (includes platform & other and data). Further, both the sub-segments reported growth in FY 2022 – Salesforce CRM (19%) and cloud services (32%), thanks to an increase in IT spending on digital transformation projects. We expect the first-quarter results to be on similar lines.
- While the professional services & other contributes only a minority share of the total revenues (7% in FY 2022), it has witnessed significant improvement in its numbers. We expect the same momentum to continue in the first quarter.
- Overall, we forecast Salesforce’s revenues to remain around $32.6 billion for FY 2023.
Trefis estimates Salesforce’s fiscal Q1 2023 revenues to be around $7.45 billion, 1% above the $7.38 billion consensus estimate. We expect the higher IT spending by companies across sectors to drive the first-quarter results.
Moving forward, we anticipate the high demand for Salesforce’s products to continue over the subsequent quarters. Our dashboard on Salesforce’s revenues offers more details on the company’s operating segments along with our forecast for FY2023.
(2) EPS is likely to beat the consensus estimates
Salesforce Q1 FY2023 adjusted earnings per share (EPS) is expected to be $0.96 per Trefis analysis, almost 2% above the consensus estimate of $0.94. Despite the growth in the top line, the net income decreased 65% to $1.4 billion. It was primarily due to a one-time discrete tax benefit received in 2021 and lower gains on strategic investments in 2022.
We expect the net income margin to see some improvement in the current year. Overall, Salesforce is likely to report an adjusted net income of $2.3 billion and annual GAAP EPS of $2.24 for FY 2023.
(3) Stock price estimate is 84% more than the current market price
We arrive at Salesforce’s valuation, using an EPS estimate of around $2.24 and a P/E multiple of just above 133x in fiscal 2022. This translates into a price of $299, which is 84% above the current market price of around $162.
Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year
|S&P 500 Return||-2%||-15%||81%|
|Trefis Multi-Strategy Portfolio||-3%||-19%||218%|
 Month-to-date and year-to-date as of 5/27/2022
 Cumulative total returns since the end of 2016