Will analysts cut CRM slack on $27bn messaging app takeover?
Salesforce’s acquisition of Slack changed the company and drove the stock price higher
The Salesforce (CRM) stock forecast can be an unpredictable beast at times. When rumours began to circulate in mid-November 2020 that the company was planning to acquire Slack, CRM’s share price actually fell.
Lo and behold, when the cloud computing giant confirmed that a deal had been reached a few weeks later, backlash from markets was even more severe. It seems that Wall Street was not impressed by Salesforce’s $27.7bn cash-and-stock takeover, with its share price tumbling by about 9.5%.
Fast-forward to the fourth-quarter results released on 1 March 2022, and for the end of the fiscal year that included the summertime completion of the deal. Slack made $312m in revenue for the last quarter — $27m better than guidance — and $592m after two quarters. The acquisition is even transforming its new parent company, co-CEO Bret Taylor told analysts. CRM has sent 46% fewer email messages. Employees sent nearly 60 million Slack messages and met on 500,000 Slack Huddles. “We run Salesforce on Slack,” Taylor said.
It is clear that the company believes that remote working is becoming a permanent aspect of all our lives in the late stages of the pandemic. Indeed, some firms have already decided to close offices permanently – banishing employees to their sofas and spare rooms for the foreseeable future. But there is danger here, and the CRM stock forecast could suffer if the age-old habit of commuting enjoys a sudden resurgence.
There was plenty of competition in the race to buy Slack, with reports suggesting that Microsoft was also interested in throwing its hat into the ring. When looking at CRM stock predictions going forward, it is worth remembering that the world of workplace communication tools is incredibly competitive. Slack is jostling for attention against the likes of Microsoft Teams, Monday.com and Zoom, to mention just a few.
One positive spin on the Salesforce stock price forecast is that the company will become a much more serious rival to Microsoft in terms of its size. CRM and WORK have products that complement each other, and cross-selling between the two could result in a healthy boost to bottom lines.
“According to Slack’s research, 93% of workers are looking for flexibility when they work and 76% are looking for flexibility where they work. Companies need to connect their employees, their partners, their customers from anywhere because we all know we are not going to be in the office five days a week.”
Over time, the company’s vision is to deeply integrate Slack into every Salesforce cloud. To ensure that the transition is not too bumpy, Slack’s CEO Stewart Butterfield remains with the operating unit.
Salesforce stock: Buy or sell?
BMO Capital Market analysts are bullish about the CRM-led sector.
“We believe the sales software market can grow double digits over the next several years. We think that Salesforce is well-positioned to capture the highest growth areas of the market such as revenue management and planning.”
What is your sentiment on CRM?
Morningstar’s Dan Romanoff retained the $320 fair value estimate, calling it one of the best long-term stories in software.
“We are impressed by sales cloud's ability to defy gravity 23 years after its creation. Management noted strength in all segments, all geographies, and all customer sizes. We see deal sizes continuing to grow, with million dollar deals up 34% year over year, and ten million dollar deals more than doubled. Management noted that Slack continues to outpace internal expectations.”
Salesforce share price forecast: The latest results
Salesforce released its latest financial results, covering the fourth quarter and full year, on 1 March. Except for the $28m loss, it was a strong set of numbers. Fourth quarter revenue was up 26% year-on-year, hitting $7.33bn. The company also upped its revenue guidance for 2023 to $32.1bn at the high end, with co-CEO Marc Benioff remarking about the rollercoaster ride:
"I'm here on the 61st floor of Salesforce Tower. We've got significant numbers of our employees back here in the office. I was just with them. And I was also just spent a tremendous amount of time in survey in the city on how things are coming back to life here kind of in our post-pandemic reality that we're now entering, and it's powerful. This energy around here is amazing. We're really turning the corner in our battle with the virus. And I believe, in many ways, COVID is behind us. And certainly, I know that Omicron and BA.2 are very serious viruses, but we are in a very different position in the world today, fighting these things than we were a couple of years ago.”
But how do these numbers, when combined with the Slack takeover, translate into Salesforce stock price predictions?
Well, according to CNN Business, the high-end Salesforce stock forecast over the next 12 months stands at $385. The median view anticipates $315. And, in the worst-case scenario, analysts are anticipating a drop to lows of $210.
On 9 November 2021, CRM stock price hit an all-time high close of $309.71. It settled down to $296.74 by 29 November, and lost 15% on 1 December, after the earnings results hit the street. It stood at $208.89 on its most recent reporting day.
At present, 37 of 50 analysts have a buy rating, five say it will outperform, eight recommend holding the stock. Nobody says sell.
In the next six months, we will get a better sense of whether Salesforce’s canny decision to buy Slack has paid off. The corporate world will decide whether it wishes to return to city centres and the old-fashioned, face-to-face way of doing business. A YouGov survey from last September found that 70% of respondents predicted workers would not go back to normal at offices when the pandemic ends. Executives may face some pressure from their staff to offer greater level of flexibility.