Salesforce Goes All in on Margin Expansion and Share Buybacks; FVE Increased to $245

Salesforce delivered an epic quarter in what we believe is truly a seminal moment within its lifecycle. For its fiscal fourth quarter, the company delivered substantial upside to both revenue and profitability, which is an impressive achievement. However, the company’s pivot toward profitability over the next two years was well beyond our expectations. Further, the company has already expanded its share repurchase authorization to $20 billion, from $10 billion previously, while also disbanding its mergers and acquisitions committee as the company focuses on organic growth. We think this margin expansion is achievable and, in turn, we are raising our fair value estimate to $245 per share from $220. Shares look attractive even after an aftermarket pop, and the stock remain one of our top picks.