While Berg believes this cost reduction is a step (albeit a one-time step function) in the right direction for Salesforce to expand future margins.
The analyst believes these reductions could have an immediate 200bps impact on the FY24 operating margin.
Berg raisedFY24 EPS estimate by reducing the FY24 revenue forecast as the update reflected challenging current and near-term sales.
Mizuho analyst Gregg Moskowitz reiterated a Buy with a $200 price target.
While the update does not surprise Moskowitz, these actions better align CRM’s cost structure with its growth profile and, in the analyst’s view, clearly place CRM on a firmer path to reach its non-GAAP operating margin target of 25%+ by FY26.
The analyst commended management’s commitment to disciplined, profitable growth.
At the same time, the analyst believes the news also supports the view that Street revenue estimates for 11% growth in FY24 are likely too high.
RBC Capital analyst Rishi Jaluria maintained an Outperform with a $200 price target.
The update was unsurprising to Jaluria, given the company’s aggressive hiring over the past couple of years which likely led to bloat.
On the one hand, the analyst worried a RIF of this scale could indicate single-digit growth in FY24 and that the FY26 revenue target of $50 billion is likely off the table.
On the other hand, this should enable Salesforce to achieve 25%+ operating margins well ahead of schedule.
Price Action: CRM shares traded lower by 2.88% at $135.48 on the last check Thursday.
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