Salesforce Earnings: Good Results; With Shares Up About 50% In 3 Months, We’re Cautious on Valuation

We raise our fair value estimate for wide-moat Salesforce to $315 per share from $290 after its third-quarter results, while fourth-quarter guidance was slightly shy of our expectations. Still, third-quarter strength more than makes up for the modest guidance differential. Management is very enthusiastic about Agentforce, which we think represents a good long-term opportunity to transition from a mostly human agent labor force to a mostly virtual agent pool over time. Shares have run dramatically and are up 45% to 50% over the last three months, assuming the 9% after-hours surge holds. Even with our fair value increase today, we see shares as overvalued. Our revenue estimate for next year is 1% above FactSet consensus, while non-GAAP operating margin is approximately in line, and shares are trading above our fair value estimate.