Yahoo Finance What to expect from Salesforce at the 20th Dreamforce
Wall Street and most of the tech industry has its sights set on not only this week's Fed meeting, but also the three-day annual extravaganza that Salesforce holds known as Dreamforce.
The 20th Dreamforce — a meeting of high-profile speakers and the software king's employees and partners — kicks off this week in Salesforce's backyard in San Francisco at the Moscone Center. About 10,000 Salesforce employees will be in attendance alongside 100 plus CEOs, according to stats shared by Salesforce with Yahoo Finance. Approximately 40,000 people are slated to attend in-person.
Featured speakers include Salesforce Founder Marc Benioff, Co-CEO Bret Taylor, and former Vice President Al Gore. Yahoo Finance will be on-air mid-week from the event with a host of big interviews.
Also stuffed into the spectacle is a key investor day for Salesforce on Sept. 21.
Wall Street is watching the event closely as tech companies have warned lately of a slowdown in deal activity amid economic uncertainty. Salesforce stock — reflecting some of this macro uncertainty — are down 26% in the past six months. The Dow is down 9.5% over that same stretch.
In a new note to clients, tech analyst Brent Thill of Jefferies said he is looking for Salesforce to provide an update on its long-term guidance, notably reaching $50 billion in sales by fiscal year.
Here are some takeaways from Thill's pre-Salesforce investor day note.
Price Target: $250
Rating: Buy (reiterated)
Stock price movement assumed: +65%
The industry backdrop for software has softened in recent months.
"Front office apps demand has been under pressure as evidenced by the Salesforce, Braze, and Adobe prints this quarter," Thill wrote. "This is due to a combination of pull forward in demand during the pandemic and macro headwinds. Our partner survey was the 3rd most negative survey since we began running it in fiscal year 2015 (other two at start of pandemic). Management also cited “more measured buying behavior” that resulted in stretched sales cycles, additional approval layers, and deal compression during the recent print. Unlike last year, we do not expect Salesforce to provide a fiscal year 2024 top line guidance since Dreamforce is happening earlier and the environment is tougher."
Salesforce could strike a slightly more cautious tone on medium-term guidance.
"Last year management laid out a path to $50 billion revenue by fiscal year 2025 translating to 17% CAGR [compound annual growth] from the fiscal year 2022 guidance then," Thill noted. "While we remain positive on the secular tailwinds towards front office digital transformation, we believe the near-term foreign exchange and macro headwinds will have an impact on Salesforce's medium-term ambitions. As such, we are modeling total revenue of $48 billion in fiscal year 2026, implying a 16% 4-year CAGR."
Profit margins are in focus.
"We expect Salesforce to provide a fiscal year 2026 margin target (Street is at 25% vs. 20.4% in fiscal year 2023)," Thill stated. "We also expect to get an initial indication of margins for fiscal year 2024 (Street at 21.6%). We believe that CFO Amy Weaver is committed to delivering higher margins as Salesforce lags large cap peers at mid to high 30s."
Buybacks are coming.
"Recall Salesforce announced its first ever buyback of $10 billion a few [weeks] ago," Thill wrote. "Investors have been asking about the planned timeline to execute the buyback."
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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