Salesforce Falls as Surprise Executive Exit Overshadows Earnings
(Bloomberg) -- Salesforce.com Inc. delivered a bag of surprises with its year-end earnings, including a $1.3 billion acquisition of Vlocity Inc. and most notably the exit of co-chief executive officer Keith Block, which prompted some concern on Wall Street.
Evercore said Block leaves Salesforce in a sound position competitively and operationally, but his exit begs “the question of who will step into his shoes from a sales leadership and operational standpoint.” Meanwhile, Wedbush highlighted that it’s “not sure what to make of this change.”
Shares in the company declined 1.7% during Wednesday’s pre-market trading.
Generally, Wall Street remains confident in Salesforce’s positioning going forward. “We’re still in good hands,” Brian Peterson, an analyst at Raymond James, wrote in a note touting the tenure of Marc Benioff, who once again becomes the sole CEO.
Here’s what analysts are saying:
Roth Capital Partners (Richard Baldry)
Neutral, price target $165 from $139
“While F21 revenue and PF EPS was guided modestly higher, recent price appreciation and the co-CEO departure also announced yesterday leaves us sidelined with a neutral rating.”
“Revenue guidance upside appears mostly driven by acquisition impacts,” Baldry wrote in a note. “Excluding acquisitions, revenues grew a more modest 22%.”
Compass Point (Marshall Senk)
Buy, price target $202
“The surprise in the quarter was the announced departure of co-CEO Keith Block, who has been a linchpin in quadrupling revenues over the past seven years.”
Senk said “the stock may show some weakness on this news.”
“Given the depth of the management bench, the $30 billion of RPO and the company’s consistent execution track record, we are confident that the team will execute through Block’s departure from day to day operations.”
Raymond James (Brian Peterson)
Strong buy, price target $230 from $200
Positively, Salesforce’s “strong results and above consensus outlook suggests that fundamentals remain impressive, while the Vlocity acquisition gives them a broader presence in a number of key verticals.”
“That said, co-CEO Keith Block’s decision to step down may also raise questions on big deal momentum, though we remind investors that Mr. Benioff has built one of the most successful software companies of all time (i.e. - we’re still in good hands).”
“We understand the inclination to trim on high profile management changes, but see little to disrupt CRM’s growth trajectory in the next several years.”
Wedbush (Steve Koenig)
Outperform, price target $217
“Acquisitions put a dent in FY21 operating cash flow guidance, and the departure of Keith Block from his co-CEO role was a surprise.”
“We’re not sure what to make of this change, but perhaps it’s related to media reports that have suggested Chairman and CEO Marc Benioff is preparing for a transition to next-generation leadership.”
Piper Sandler (Brent Bracelin)
Overweight, price target $205
“The unexpected departure of co-CEO Keith Block may overshadow these solid results,” Bracelin wrote in a note, citing the potential for rising execution risks.
“After a 26-year career at Oracle and just shy of seven years at Salesforce, Keith Block was a well respected leader internally and externally who helped scale” the company from a $3.8 billion run-rate when he joined to a $19 billion-plus run-rate today.
Citigroup (Walter Pritchard)
“The exit of Block is surprising, given ascension to the post from COO was just 18 months ago.”
“We believe CRM’s deep bench will enable operational continuity, although acknowledge the change happened abruptly and without obvious explanation.”
To contact the reporter on this story: Kamaron Leach in New York at kleach6@bloomberg.net
To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Kristine Owram
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