Salesforce rose on Tuesday after activist investor Starboard Value announced a stake in the business software provider. Salesforce shares had fallen 40% in 2022 due to a general sell-off in the software sector.
Starboard founder Jeff Smith did not disclose the magnitude of the hedge fund’s holding in Salesforce shares in an interview with CNBC. Today’s stock market action saw Salesforce stock rise 6.2% to 156.20. The hedge fund Starboard has targeted health care provider Cerner, which is now purchased by Oracle, as well as Papa John’s International, Bristol-Myers Squibb, and chipmaker Marvell Technology in recent years.
Salesforce has made many acquisition itself, the most recent of which being Slack Technologies, a manufacturer of workplace communication software.
The tech giant offers software as a subscription service. Its software assists users in organizing and managing their sales activities and client interactions. The company have added marketing, e-commerce, and data analytics in its offerings.
The company’s shares was recently repurchased for $10 billion by the business software company.
Activist investor stays optimistic about Salesforce growing prospects
Salesforce is currently trading at a significant discount to peer multiples, despite the company’s leading market position, solid long-term growth profile, and significant margin-expansion opportunity, according to Starboard’s Smith, who added that the company’s valuation discount appeared to be largely the result of Salesforce’s subpar growth and profitability mix.
While Salesforce’s growth has slowed, the business has not achieved the margins one would anticipate from a company in its leading position, according to the Starboard presentation. However, Starboard remains optimistic about Salesforce’s attempts to increase growth and profitability. The Starboard team believes the company’s margin objectives still allow substantial space for improvement. In addition, the firm has the potential to dramatically increase free cash flow per share over the next few years.
Salesforce shares are down 46% over a 12-month period, while the S&P 500 lost 16% and the Dow Jones Industrial Average, of which Salesforce is a component, is down 13%.
