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Should you buy Salesforce stock on the post-earnings dip?

Shares of Salesforce Inc (NYSE: CRM) are trading down after the bell even though the cloud company reported better-than-expected results for its third financial quarter in the face of a rather difficult economic backdrop.

Here’s why Salesforce stock is in the red

The stock is responding to guidance that didn’t quite meet the expectations.

Salesforce is calling for $7.93 billion to $8.03 billion in Q4 revenue – the midpoint of which is below $8.02 billion that experts had forecast. It did, however, lifted its full-year earnings outlook to $4.92 a share to $4.94 a share.

Part of the sell-off may be related to the news that Bret Taylor – the co-Chief Executive of Salesforce will exit the role on January 31st. Marc Benioff will remain the sole CEO and Chairman of the company.

Analyst sees 90% upside in Salesforce stock

But the weakness might just be an opportunity to buy Salesforce stock at a discount, as far as John Freeman – Senior Equity Analyst at CFRA is concerned. He has a $284 price target on “CRM”, which represents a massive 90% upside from here.

The guidance on revenue was light. But this company has such good fundamentals, solid recurring revenue. It has a track record as a great long-term investment and it has really good economics.

Freeman doesn’t see Taylor stepping down as a meaningful negative either. Explaining what could unlock that much of an upside in Salesforce stock, he said on Yahoo Finance Live:

Earnings beat today was pretty solid and it’ll continue going forward and that’ll help. But what it really needs is a macro catalyst. Something like, for example, Ukraine coming through with a victory.

Salesforce’s Q3 earnings snapshot

Net income tanked significantly from $468 million to $210 million
Per-share earnings of 21 cents were well below last year’s 47 cents
On an adjusted basis, EPS stood at $1.40 as per the press release

Revenue went up 19% on a year-over-year basis to $7.84 billion
Consensus was $1.22 of adjusted EPS on $7.83 billion revenue

According to Salesforce, its subscription and support sales were up 13% this quarter while professional services went up 25%.

Last month, activist Starboard Value took a stake in Salesforce as Invezz reported here. Versus the start of 2022, Salesforce stock is now down more than 40%.

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