Salesforce Analysts Expect Revenue Uplift and Monetization Potential Following Price Hike

Salesforce, Inc CRM announced a price increase for many Clouds effective August 2023. The expansion will apply to all new purchases, marking CRM's first price hike in seven years.

The average list price increase is about 9% for the impacted products and will be effective at the beginning of August 2023 or the start of CRM's 3Q24. 

Also Read: Salesforce Boosts Prices Of Cloud Tools

BMO Capital analyst Keith Bachman maintains Salesforce with an Outperform, raising the price target from $245 to $255. The price increases and new generative AI solutions can help support growth in FY25 (CY24).

The analyst suspects the average contract duration for Salesforce is, on average, three years. 

Bachman suspects the price increases can help growth amidst a lot of internal restructuring at Salesforce and provide margin leverage. Additionally, he said that several other covered companies have or will announce price raises due to the inflationary backdrop. 

Mizuho analyst Gregg Moskowitz maintains Salesforce with a Buy and raises the price target from $240 to $250.

Importantly, this represents CRM's first price increase in roughly seven years, following the co.'s recent announcements about GenAI. 

The analyst stated in prior research that its new AI Cloud holds significant monetization potential, especially given a large installed base and CRM continues to expand and enrich its GenAI capabilities significantly. 

He also wrote that CRM can drive much greater automation in the future, along with better sales productivity. 

The analyst said he expects this forthcoming price increase will have a marginal/negligible impact in the second half of FY23, with a more meaningful impact in FY25E.

Needham analyst Scott Berg maintains Salesforce with a Buy and raises the price target from $230 to $250.

Berg concluded that there is the potential for $229 million of revenue uplift in the first 12 months (4Q24 - 3Q25), and given there will be minimal costs tied to this additional revenue, EPS could increase $0.16 or a 2% uplift from his $8.01 estimate for these 12 months. 

He estimates the full annualized impact could approximate revenue/EPS of $366 million/$ 0.26. 

B of A Securities analyst Brad Sills reiterated Salesforce with a Buy and a $250 price target.

Price Action: CRM shares traded higher by 2.01% at $225.63 on the last check Wednesday.