Salesforce is evolving. Goldman Sachs thinks there's more value yet to come.
Stephen Lam
Salesforce (NYSE:CRM) has undergone a massive transformation over the past year, dealing with several activist investors, letting go 10% of its workforce and worries that it may need to shed assets, even with the stock up nearly 70% year-to-date.
But as the Marc Benioff-led company continues to evolve, both from an operational and product standpoint, Goldman Sachs believes there is still more value to come.
Analyst Kash Rangan, who has a buy rating on Salesforce (CRM) and a per-share price target of $325, noted the company's recent price increases to core products come after "meaningful" improvements to cost, go-to-market and capital allocation. 
"Though pricingâs contribution to growth this year will likely be minimal given the 9% lift (on average) goes into effect in August and only applies to new customers of Tableau and its Sales, Service, Marketing, and Industry Clouds, we see room for upside to [second-half current revenue performance obligation] expectations," Rangan wrote in an investor note, adding he believes it's possible Salesforce (CRM) could see revenue growth re-accelerate.
The boost is likely to come from new business booked at Salesforce's annual Dreamforce conference, along with the "seasonally strong" fourth-quarter. Rangan added this strategy is likely to expand to more of the company's portfolio, including MuleSoft, Slack and Analytics.
The addition of generative AI features are also likely to boost the value of Salesforce's (CRM) platform and the company's recent price hike for customers - its first in seven years - would allow Salesforce (CRM) to follow in the footsteps of Microsoft (MSFT), Intuit (INTU) and Adobe (ADBE).
"We also see the boost to revenue supporting Salesforceâs margin expansion efforts amid an accelerated gen-AI product roadmap," Rangan added.
Rangan believes that Salesforce (CRM) is likely to take its fair share of the $1T total addressable market for the cloud and is on a path to generating $50B in annual revenue. For comparison purposes, Salesforce (CRM) generated $31.4B in total revenue in fiscal 2023 sales, up 18% year-over-year. 
Salesforce (CRM) is likely to achieve the $50B figure thanks in part to the COVID-19 pandemic, which Rangan said transformed "how companies initiate, build and harness customer relationships digitally, making for steady demand in core products." 
"We think revenues and margins have the potential to double in the next 5-6 years, potentially quadrupling earnings in steady state," Rangan continued. "To that end, we remain bullish on the companyâs ability to drive continued [year-over-year] operating margin expansion beyond [fiscal 2023]." 
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