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4 Must-See Metrics Behind Salesforce.com's Soaring Stock

By Daniel Sparks – Sep 26, 2021 at 11:45AM

Key Points

  • Last week, Salesforce increased its guidance for its revenue and operating margin.
  • Over a dozen analysts lifted their price targets for the stock last week.
  • One analyst thinks Salesforce shares can rise to $375 over the next 12 months.

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The stock's performance has crushed the S&P 500's return this year -- and one analyst thinks there's significant upside to come.

Shares of Salesforce.com (CRM 0.67%) have rocketed higher recently. The software-as-a-service juggernaut's shares are up 28% year to date and 10% in the last five trading days alone, putting the tech stock at an all-time high. 

The stock's surge higher has been driven largely by the customer relationship management software specialist's impressive financial results. Salesforce's fiscal second-quarter earnings report in late August and a move from Salesforce management on Thursday to raise its fiscal 2022 revenue guidance and initiate a bullish outlook for fiscal 2023 revenue have investors drooling.

Here's a closer look at some of the key metrics that have investors so excited about the stock.

A digital-looking cloud.

Image source: Getty Images.

1. Strong double-digit revenue growth

Salesforce's business continues to grow rapidly, despite its enormous size. Fiscal-second-quarter revenue increased 23% year over year to $6.34 billion. At the time of the earnings report, management said it expected full-year fiscal 2022 revenue to be between $26.2 billion and $26.3 billion, representing 23% to 24% growth. But now Salesforce is targeting an even higher range (more on that in the next point). 

2. Annual revenue should soar past $30 billion next year

In a business update on Thursday, Salesforce lifted its view for full-year fiscal 2022 revenue, guiding for $26.5 billion to $26.35 billion in revenue for the period.

While guidance only represented a slight improvement from the revenue guidance range management previously provided, there was another more exciting figure in the business update: the first look at the company's fiscal 2023 guidance. Management said it expects full-year fiscal 2023 revenue to be between $31.65 billion and $31.80 billion. This means that management is guiding for 20%-plus top-line growth again next year. Given that Salesforce's initial revenue guidance for a given fiscal year almost always proves to be meaningfully conservative, this is a bullish take for the company's initial fiscal 2023 revenue forecast.

3. Improving profitability

Management also indicated last week that it expects a significant improvement in its non-GAAP (adjusted) operating margin. Salesforce said it expects a non-GAAP operating margin of 20% in fiscal 2023, up from management's current estimate for a fiscal 2022 non-GAAP operating margin of 18.5%.

The expected improvement is even more substantial on a GAAP basis. Salesforce said it expects a fiscal 2023 GAAP operating margin of 3% to 3.5%, up from management's forecast of 1.8% for fiscal 2022.

4. 30%-plus upside?

One more key reason investors are likely excited about Salesforce stock is the stream of analyst upgrades for shares. Following the company's recent guidance hike, one analyst notably gave shares an impressive 12-month price target of $375, up from a previous target of $325. 

Reiterating an outperform rating for shares, the Evercore ISI analyst said that Salesforce's analyst day last week was "upbeat." He praised management's view for its operating margin expansion and he notes that the company's strong financial potential makes shares seem attractively valued today.

While this Evercore analyst is among the most bullish analysts covering the stock, he's not alone in his move to upgrade his price target for the stock last week. More than a dozen analysts increased their price targets for the stock following Salesforce's analyst day presentation on Thursday.

Of course, investors should do their own due diligence instead of relying on an analyst's opinion when deciding whether a stock is attractive or not. But Salesforce's top-line momentum and management's expectations for continued growth and margin expansion are certainly impressive, explaining why investors have been buying up shares.

Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool owns shares of and recommends Salesforce.com. The Motley Fool has a disclosure policy.

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