Shares of Salesforce surged in extended trading Tuesday after the enterprise software giant reported better-than-expected quarterly revenue and issued a solid forecast for the current period. But most importantly, the company showed that Agentforce, its new AI platform, may kickstart revenue growth in the future. Revenue in the fiscal 2025 third quarter increased 8% year over year to $9.44 billion, above both the high end of guidance and the $9.35 billion expected by analysts, according to estimates compiled by LSEG. Adjusted earnings per share of $2.41 increased 14% on an annual basis, missing the $2.44 projected by analysts, LSEG data showed. Adjusted operating margin expanded to 33.1% in the three months ended Oct. 31, beating the consensus estimate of 32.27%, according to FactSet. On a Generally Accepted Accounting Principles (GAAP) basis, operating margin came in at 20%, above the expected 18.93%. CRM YTD mountain Salesforce’s stock performance in 2024. Bottom line Salesforce delivered the goods. With the stock up more than 10% to $360 per share in extended trading, we are increasing our price target to $400 from $300. However, we are keeping our 2 rating due to its recent rally, meaning we’d wait for pullbacks before adding to the position. Wall Street is willing to look past Salesforce’s slight miss on adjusted EPS because of the upbeat revenue performance. Investors know Salesforce has become disciplined on margins, but what the market really wants to see next to take the stock higher is better topline growth. The quarterly results and outlook demonstrated that the company’s fundamentals have remained resilient without any contribution from one of the most exciting product launches in its history: Agentforce. Salesforce Why we own it : Salesforce is a leading enterprise software tool for companies across all industries, helping employees to better communicate with colleagues internally and with their customers. The company’s balance of margin expansion with the potential for faster topline growth — aided by AI adoption — should lead to strong earnings growth. Competitors : SAP , Microsoft , HubSpot Most recent buy : Dec. 21, 2022 Initiation : June 15, 2018 Agentforce is the company’s platform of AI-powered assistants that can perform tasks and make decisions autonomously. This new product has completely reshaped the stock’s narrative . When the stock traded in the low $200s over the summer, there was a fear that AI would disrupt Salesforce’s business model. The concern was basically that if companies needed fewer workers thanks to AI, companies that sell software licenses on a per-person basis may, as a result, experience softer demand. Salesforce crushed this bear thesis over the past few months — and especially after its annual Dreamforce conference in September, when it unveiled Agentforce in earnest. The platform only became generally available in the last week of Salesforce’s reported quarter, so it’s still too early in the…
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