Salesforce.com’s NYSE: CRM stock price is having trouble with traction following the Q4 results and guidance, but a massive correction is not expected for this tech stock. The results did not catalyze a rally but are good news for investors. The takeaway is that the cloud continues to grow, and Salesforce.com is a leading provider of AI-powered capability. Its new Einstein 1 Platform is the first comprehensive set of tools for customer relationship management, and business is good. 

Business is so good that Salesforce.com followed Meta Platform’s NASDAQ: META lead and initiated a dividend. The payout is worth $0.40 per quarter or $1.60 annually, about 0.5% yield with shares at $300, and can be expected to grow over time. This payout is a slim 17% quarterly and annually, and the balance sheet is a fortress.

Among the many indicators is the board’s decision to increase the share repurchase authorization by $10 billion or 3.4% of the market cap. Repurchases in Q4 are worth $1.7 billion, resulting in an 80 basis point reduction in the YOY share count.

Salesforce Has a Solid Quarter; Offers Mixed Guidance 

Salesforce.com had a strong quarter, with revenue and earnings outpacing the analysts’ consensus. The company brought in $9.29 billion in revenue for a gain of 10.9% to beat consensus by 75 bps. Strength is driven entirely by core business, Subscription and Services is up 12% while Pro fell by 9%. The current and total RPOs, leading business indicators, are up 12% and 17%, respectively. 

The margin news is most impressive. The top-line growth, higher price realization and AI efficiencies aided significant margin improvement. The adjusted operating margin improved nearly 1000 basis points to 31.4% and is forecast to expand more in F2025. The net result is leveraged earnings and cash flow. Cash flow improved by 22%, free cash flow by 27%, and adjusted earnings by 36%. 

Guidance is below the analysts’ consensus but forecasts solid 8% to 9% YOY revenue growth and may be cautious. The factor that is helping to support the market is an expected increase in margin and how it impacts the capital return outlook, which is positive. The margin is expected to widen by 110 bps adjusted, and it may also be a cautious forecast. 

Analysts Step Up and Raise Targets for Salesforce.com 

The analysts’ activity is firmly bullish following the release. Marketbeat.com tracks revisions from nearly a dozen of thirty-six analysts following the stock, and all are favorable. The only ones not to include a price target increase are reiterated ratings, which all amount to a Moderate Buy rating. The consensus target continues to lag the market but is up 45% YOY and rising, with most new revisions well above $300. A move to $300 aligns with the all-time high; a move above it sets a new high and opens the door for a sustained rally in 2024. 

The takeaway from the chatter is that macro-challenges aside, there are strong trends in cloud and AI driving business. Because Einstein is a small portion of the guidance, there is a significant chance it will drive outperformance in 2024. In the long term, AI is viewed as a land-grab opportunity for cloud-oriented businesses, and Salesforce.com is a leading player with the ability to generate revenue now. 

The Technical Outlook: Salesforce.com Is At a Critical Juncture

Salesfoce.com rallied strongly in 2023 and 2024 but may have reached a peak. The market is struggling with resistance near the all-time high and may enter consolidation before it continues higher. In this scenario, the price action may pull back to the $280 level, but support is expected to be strong. A move below $280 may lead to a deeper selloff, but is not likely. The critical resistance point is near $310. 

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