Salesforce's Uncertain Long-term Growth Saga: This Analyst Prefers Adobe & Microsoft More

BMO Capital Markets analyst Keith Bachman reiterated the Outperform rating on Salesforce, Inc. CRM, lowering the price target to $252 from $262.

The analyst forecasts 10% growth and about 150bps of FY25 margin expansion, which includes mid-single-digit growth in sales & marketing expenses.

However, the analyst lowered the target price due to uncertainty on long-term growth. The analyst remains Outperform but prefers Adobe Inc ADBE and Microsoft Corporation MSFT more.

The analyst says Adobe remains the leader in customer data platform (CDP) solutions, ahead of Salesforce.

Salesforce's valuation appears reasonable, if not attractive, on all key metrics versus the large-cap GARP peers. 

Salesforce's S&M expense margin is still very high compared to large-cap peers, and thus, margin improvement can continue even if S&M grows, though likely at a slower pace than recent margin expansion.

However, CRM will benefit by offering an integrated set of cloud suites. The analyst highlights the company's scale that provides brand, sales, and cost advantages versus other SaaS vendors. 

The analyst adds that the company has durable margin expansion potential.

Price Action: CRM shares are trading lower by 0.41% to $224.21 on the last check Tuesday.

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