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Salesforce (CRM) Gains 4% on Product Price Hike Announcement
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Salesforce (CRM - Free Report) shares rallied 3.9% on Tuesday after the cloud-based enterprise software maker announced that it would raise the prices of some of its products. The company plans to hike prices across its core products — Sales Cloud, Service Cloud, Marketing Cloud, Industries and Tableau — by an average 9%, effective from August 2023.
The hike will mark Salesforce’s first product price increase in the last seven years. The company stated that it invested more than $20 billion in the last seven years in research and development to deliver 22 new releases and add thousands of new features, including the recent generative artificial intelligence (AI) to its software.
With the year-to-date (YTD) gain of 66.8%, CRM stock has outperformed the broader equity indexes, Nasdaq Composite, The Dow Jones Industrial Average and the S&P 500, which have increased 31.5%, 3.4% and 15.6%, respectively. The company has been benefiting from the strong adoption of its cloud-based products and solutions as customers are undergoing a major digital transformation amid the ongoing hybrid work environment. Its ability to provide an integrated solution for customers’ business problems is the key driver.
We believe that Salesforce’s sustained focus on enhancing customer experience by launching new products and adding innovative features to the existing ones has given it the liberty to raise product prices.
Salesforce’s price hike announcement came at a time when the company is primarily focusing on incorporating generative AI tools across its products as it looks to keep its business ahead of rivals. Generative AI is a type of AI technology that can produce various types of content, including text, imagery, audio and synthetic data. It is driven by a large language model, which means it uses a lot of data to understand and generate conversations.
CRM forayed into the generative AI space with the launch of Einstein GPT in March 2023. Einstein GPT is the world’s first generative AI Customer Relationship Management technology, which delivers AI-created content across every sales, service, marketing, commerce and IT interaction at hyperscale. With Einstein GPT, the company will transform customer experience with generative AI.
Upping its ante in the space, last month, Salesforce launched its AI Cloud service, which the company claims is a one-stop AI-powered solution for enterprises looking to enhance productivity. Salesforce stated that its AI Cloud is a suite of services that delivers enterprise-ready real-time, open and secure generative experiences across all applications and workflows. The suite will power new capabilities across CRM’s products, including Einstein service, data analysis software Tableau and workplace-messaging app, Slack.
Price Hike to Boost Revenues and Profit
We believe that the recent hike will help Salesforce counter the slowdown in revenue growth in the post-pandemic environment. The company’s year-over-year revenue growth, which was in the mid-20s percentage range during fiscal 2020, 2021 and 2022, reduced to the high-teens percentage range in fiscal 2023.
The enterprise software maker had witnessed a tremendous rise in the demand for its cloud-based solutions during the pandemic-led accelerated digital transformation. However, the demand has slowed down as enterprises are postponing their large IT spending plans due to ongoing macroeconomic headwinds, including higher inflation and increased interest rates.
Additionally, the recent increase in product prices is likely to boost the company’s profitability. Several shareholders have criticized Salesforce for not taking advantage of its position as a market leader, which has caused a lag in profitability compared with its peers.
To cut costs and improve profitability, Salesforce announced a broader restructuring plan in early January 2022. Under the plan, it intends to lay off approximately 10% of its total global workforce, exit real estate and shut down office spaces in certain markets.
Some other top-ranked stocks from the broader technology sector are Adobe (ADBE - Free Report) , Meta Platforms (META - Free Report) and Blackbaud (BLKB - Free Report) , each carrying a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Adobe's third-quarter fiscal 2023 earnings has been revised upward by 12 cents to $3.97 per share for the past 30 days. For fiscal 2023, earnings estimates have moved upward by 26 cents to $15.70 per share in the past 30 days.
Adobe's earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 3.1%. Shares of ADBE have soared 50% YTD.
The Zacks Consensus Estimate for Meta's second-quarter 2023 earnings has been revised a penny northward to $2.83 per share in the past seven days. For 2023, earnings estimates have increased by 3 cents to $11.97 per share in the past seven days.
Meta’s earnings beat the Zacks Consensus Estimate twice in the preceding four quarters while missing the same on two occasions, the average surprise being 15.5%. Shares of META have surged 147.9% YTD.
The Zacks Consensus Estimate for Blackbaud’s second-quarter 2023 earnings has been revised by a couple of cents northward to 93 cents per share in the past 60 days. For 2023, earnings estimates have increased to $3.75 per share from $3.68 60 days ago.
Blackbaud's earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 10.4%. Shares of BLKB have rallied 25.7 % YTD.
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Salesforce (CRM) Gains 4% on Product Price Hike Announcement
Salesforce (CRM - Free Report) shares rallied 3.9% on Tuesday after the cloud-based enterprise software maker announced that it would raise the prices of some of its products. The company plans to hike prices across its core products — Sales Cloud, Service Cloud, Marketing Cloud, Industries and Tableau — by an average 9%, effective from August 2023.
The hike will mark Salesforce’s first product price increase in the last seven years. The company stated that it invested more than $20 billion in the last seven years in research and development to deliver 22 new releases and add thousands of new features, including the recent generative artificial intelligence (AI) to its software.
With the year-to-date (YTD) gain of 66.8%, CRM stock has outperformed the broader equity indexes, Nasdaq Composite, The Dow Jones Industrial Average and the S&P 500, which have increased 31.5%, 3.4% and 15.6%, respectively. The company has been benefiting from the strong adoption of its cloud-based products and solutions as customers are undergoing a major digital transformation amid the ongoing hybrid work environment. Its ability to provide an integrated solution for customers’ business problems is the key driver.
Salesforce Inc. Price and Consensus
Salesforce Inc. price-consensus-chart | Salesforce Inc. Quote
Product Enhancement Aids Price Hike
We believe that Salesforce’s sustained focus on enhancing customer experience by launching new products and adding innovative features to the existing ones has given it the liberty to raise product prices.
Salesforce’s price hike announcement came at a time when the company is primarily focusing on incorporating generative AI tools across its products as it looks to keep its business ahead of rivals. Generative AI is a type of AI technology that can produce various types of content, including text, imagery, audio and synthetic data. It is driven by a large language model, which means it uses a lot of data to understand and generate conversations.
CRM forayed into the generative AI space with the launch of Einstein GPT in March 2023. Einstein GPT is the world’s first generative AI Customer Relationship Management technology, which delivers AI-created content across every sales, service, marketing, commerce and IT interaction at hyperscale. With Einstein GPT, the company will transform customer experience with generative AI.
Upping its ante in the space, last month, Salesforce launched its AI Cloud service, which the company claims is a one-stop AI-powered solution for enterprises looking to enhance productivity. Salesforce stated that its AI Cloud is a suite of services that delivers enterprise-ready real-time, open and secure generative experiences across all applications and workflows. The suite will power new capabilities across CRM’s products, including Einstein service, data analysis software Tableau and workplace-messaging app, Slack.
Price Hike to Boost Revenues and Profit
We believe that the recent hike will help Salesforce counter the slowdown in revenue growth in the post-pandemic environment. The company’s year-over-year revenue growth, which was in the mid-20s percentage range during fiscal 2020, 2021 and 2022, reduced to the high-teens percentage range in fiscal 2023.
The enterprise software maker had witnessed a tremendous rise in the demand for its cloud-based solutions during the pandemic-led accelerated digital transformation. However, the demand has slowed down as enterprises are postponing their large IT spending plans due to ongoing macroeconomic headwinds, including higher inflation and increased interest rates.
Additionally, the recent increase in product prices is likely to boost the company’s profitability. Several shareholders have criticized Salesforce for not taking advantage of its position as a market leader, which has caused a lag in profitability compared with its peers.
To cut costs and improve profitability, Salesforce announced a broader restructuring plan in early January 2022. Under the plan, it intends to lay off approximately 10% of its total global workforce, exit real estate and shut down office spaces in certain markets.
Zacks Rank and Other Stocks to Consider
Currently, Salesforce sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Some other top-ranked stocks from the broader technology sector are Adobe (ADBE - Free Report) , Meta Platforms (META - Free Report) and Blackbaud (BLKB - Free Report) , each carrying a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Adobe's third-quarter fiscal 2023 earnings has been revised upward by 12 cents to $3.97 per share for the past 30 days. For fiscal 2023, earnings estimates have moved upward by 26 cents to $15.70 per share in the past 30 days.
Adobe's earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 3.1%. Shares of ADBE have soared 50% YTD.
The Zacks Consensus Estimate for Meta's second-quarter 2023 earnings has been revised a penny northward to $2.83 per share in the past seven days. For 2023, earnings estimates have increased by 3 cents to $11.97 per share in the past seven days.
Meta’s earnings beat the Zacks Consensus Estimate twice in the preceding four quarters while missing the same on two occasions, the average surprise being 15.5%. Shares of META have surged 147.9% YTD.
The Zacks Consensus Estimate for Blackbaud’s second-quarter 2023 earnings has been revised by a couple of cents northward to 93 cents per share in the past 60 days. For 2023, earnings estimates have increased to $3.75 per share from $3.68 60 days ago.
Blackbaud's earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 10.4%. Shares of BLKB have rallied 25.7 % YTD.