Salesforce stock could jump 32% after 'beat and raise' quarter, Wedbush says

• Salesforce stock surged on Friday after the company beat analysts' revenue and earnings estimates.
• The firm also raised its guidance and now expects $26 billion of revenue for financial year 2022.
• Dan Ives of Wedbush says Salesforce stock will jump 32% from Thursday's closing price to $300.

Salesforce stock surged on Friday after the company posted a "beat and raise special" in its latest quarterly earnings report, according to Wedbush's Dan Ives.

In a note to clients on Friday, Wedbush's managing director of equity research, said that Salesforce revealed "the news the bulls wanted to hear" in its fiscal year 2022 first quarter earnings results.

Ives holds an "outperform" rating and $300 price target on shares of Salesforce.

That target represents a potential 32% jump from Thursday's closing price.

Salesforce posted 23% year-over-year revenue growth to hit $5.96 billion in its latest earnings release, topping the Street's $5.89 billion estimate.

Pro forma EPS came in above the Street's $0.88 expectations as well at $1.21. Billings growth was "the star of the show" in the quarter, according to Ives, coming in at $4.51 billion, well above the Street's $4.09 billion estimate.

Gross margins did fall to 78.1% from 78.3% in the year-ago period, but operating margins grew to 20.2% from 13.1% year-over-year.

"We had the best first quarter in our company's history," CEO Marc Benioff said after the release."We believe our Customer 360 platform is proving to be the most relevant technology for companies accelerating out of the pandemic."

Salesforce raised its guidance after the standout quarter, and now expects revenue of between $25.9 billion and $26 billion and earnings per share of between $3.79 and $3.81 for the fiscal year 2022.

"With incredible momentum throughout our core business, we're raising our revenue guidance for this fiscal year by $250 million to approximately $26 billion and non-GAAP operating margin to 18 percent. We're on our path to reach $50 billion in revenue in FY26," Benioff said.

In his note to clients, Ives said that Salesforce has seen "accelerated growth prospects" due to the work from home trend and he expects the digital transformation for work to continue even as the pandemic comes to an end.

"Salesforce's customer diversification, product portfolio breadth, and ratable SaaS model is continuing to gain significant momentum in the field as the digital transformation spending cycle kicks into its next gear of growth," Ives wrote.

"Digital transformation projects are getting the green light within many enterprises and is a major tailwind for Salesforce given its stalwart positioning and expanded product footprint," he added.