Salesforce Restructuring Plan A ‘Step in the Right Direction’

Salesforce (NYSE: CRM) shares jumped Wednesday following the announcement of a restructuring plan to reduce operating costs and improve operating margins.

In an SEC filing, CRM said it aims to advance the company's commitment to profitable growth through the plans, including cutting its current workforce by around 10%. It is also looking at “select real estate exits and office space reductions within certain markets.”

Salesforce said that it expects to incur approximately $1.4 billion to $2.1 billion in charges in connection with the plan, with $800 million to $1 billion expected to be incurred in the fourth quarter of fiscal 2023.

However, Jefferies analyst Brent Thill said in a note reacting to the news that the move is a “step in the right direction” for the company.

Thill, who maintained a Buy rating and $230 price target on CRM, told investors in a research note that the plan will lead to higher medium-term margins.

He added that Street expectations for 10.5% top-line growth in FY24 for CRM “are still too high,” but he believes “buy side expectations are fairly washed out.”

Meanwhile, Stifel analyst Parker Lane said the move comes “after weeks of speculation around Salesforce's plans to improve its profitability profile.”

“While the company stopped short of providing margin guidance for FY24 during its F3Q earnings call or in this morning's filing, we believe the headcount reduction displays commitment to margin expansion,” added Lane, who has a Buy rating and $175 price target on the stock.

Salesforce closed Wednesday's session up 3.57%, although the stock has declined over 45% in the last 12 months.