Buy Salesforce as cloud company goes down the 'Microsoft pathway,' Macquarie says

Published Wed, Nov 2 20226:26 AM EDT

Salesforce could be a big winner going forward, according to Macquarie. The cloud software company got an outperform rating from the firm and a $210 price target, which represents upside of 28.8%, after an analyst coverage transfer. Analyst Sarah Hindlian-Bowler said the company is less likely to be hit by global macro headwinds while entering a period of "graceful maturation." "We view the Customer Relationship Management market is a critical one, sticky, and involved in multi-year organizational digitalization plans that have only been accelerated by the COVID-19 pandemic, making businesses increasingly aware that they must be able to exist in a disrupted world by leveraging technology," she said in a note to clients. "Salesforce.com is a top strategic IT vendor, engaged in multi-year digital transformation plans for many large organizations that scale across countless industries and governmental organizations." The analyst added that, with its C-suite shifts, Salesforce likely saved itself 10 years of underperformance and is "moving down the Microsoft pathway." In August, the company named a new chief operating officer and a new chief revenue officer. Last year, Bret Taylor took over as co-CEO alongside Marc Benioff . Hindlian-Bowler also said that Salesforce is already a leader in customer relationship management with its 360 platform, she said, which has the draw of having an all-inclusive experience for companies looking to digitally transform. Within the next two years, she said there is potential for Salesforce's products to consolidate in a "suite" like Microsoft did. That could "smooth" offerings and help sales, she said. The analyst also note she does not concerns of some investors that the company will miss its $50 billion revenue target in 2026, while noting many of the headwinds come from the difficult macro environment that will make new customer acquisition harder. She said the company should meet its 25% operating margin goal in 2026 , which would show growth from from the 20% expected in 2023, with sales and marketing as a potential lever. Still, she did note that it has fallen short in some financial areas compared to Microsoft or Adobe and said the company should use its buyback and cost controls to increase share value. The stock is down 37.1% this year. — CNBC's Michael Bloom contributed to this report.