A truce with activist investor Elliott Management, the unveiling of buzzy new AI services, and long-hoped-for price increases on key products have put Salesforce stock (CRM) back in the good graces of investors.
Shares of Salesforce have gained a solid 5% in July, outperforming the modest drops in the S&P 500 and Nasdaq Composite. At $222, the stock is eyeing its 52-week high of $223.38 hit on May 31.
The advance has brought shares just beyond a 66% gain year to date.
Salesforce co-founder and CEO Marc Benioff has seen his net worth rise $2.5 billion in 2023 as a result, propelling it to $8.4 billion, according to Bloomberg data.
What ignited the July run in Salesforce's stock was initial speculation the company would raise product prices, which the Street had wanted to see for a while. That maneuver by Benioff came to fruition this week.
The company said it would increase its list prices by an average of 9% across its sales cloud, service cloud, marketing cloud, industries, and Tableau businesses in August. The new pricing will go into effect globally for new and existing customers buying cloud services in August and for existing contracts as they are renewed.
Deutsche Bank analyst Brad Zelnick thinks the price hikes will drive a "meaningful lift" to Salesforce's cash flow in 2024. The team at JPMorgan said in a client note that the announcement marks a "material positive development" for Salesforce's efforts to improve sales and profit margins.
"The price increase was the Hulk Hogan-like power move we like from Salesforce," the Salesforce bull told Yahoo Finance.
Salesforce's move on prices could be a sign of more to come as it releases new AI tools for clients, and looks to get rewarded that innovation.
Salesforce says its AI Cloud product will allow marketers to auto-generate personalized content for customers and developers to auto-generate code, among other use cases.
Salesforce employees also showed off coming AI functions in the workplace collaboration platform Slack. Most of Salesforce's new AI suite will begin rolling out in the coming months, execs told Yahoo Finance at the event (see video above).
This is all in addition to analysts praising Salesforce for better expense control after a bruising activist battle led by Elliott Management. The vibe on the Street is that Salesforce's profit margins have hit bottom and could ramp noticeably higher into next year.
But there is a wildcard, analysts told Yahoo Finance: the uncertain economic backdrop and what it means for getting large tech deals done.
"We maintain our view that Salesforce operates a business model that is bending, but not breaking, even within a challenging macroeconomy that is affecting all software companies," JPMorgan analysts noted, "and we continue to see eventual upside from current levels as the company pivots to a recession playbook and balances growth with profitability and free cash flow generation while infusing generative AI capabilities into its clouds."
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations or anything else? Email brian.sozzi@yahoofinance.com
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