Shares in Salesforce edged up Monday on a joint announcement from the software maker and Elliott Investment Management that the activist investor will not move ahead with a plans to nominate its own slate of directors to the Salesforce board. CRM stock edged up.
Elliott Management in January disclosed that it had taken a multibillion-dollar investment in Salesforce. Other activist investors in CRM stock include Starboard Value, Third Point, ValueAct Capital and Inclusive Capital.
"The announcement makes sense given how well Salesforce has executed over the past several months in increasing its profitability and outlook," William Blair analyst Arjun Bhatia said in a note to clients.
Bhatia added: "After several activists publicly announced positions in the stock toward the end of last year, Salesforce announced in late January that it was appointing 3 new independent directors, including Mason Morfit from activist ValueAct Capital. Given the progress at Salesforce in increasing profitability, as well as the recent changes in board composition, the company's priorities appear to be more aligned with investors. Therefore, we see opportunity for a constructive partnership with activists going forward."
Salesforce Chief Executive Marc Benioff has been pressured to cut costs and improve profit margins.
Elliott Managing Partner Jesse Cohn said in a written statement: "I have great respect for Marc and his team, and I have become deeply impressed by their strong ongoing commitment to profitable growth, responsible capital return and an ambitious shareholder value creation plan. We look forward to continuing our productive relationship with Marc and the Salesforce team as they accelerate the company's transformation."
CRM Stock: Salesforce Moves Placate Activist Investors
Salesforce stock rose 0.6% to close at 191.26 on the stock market today. CRM stock has gained 43% in 2023.
Meanwhile, Salesforce reported fourth-quarter earnings that topped views while its revenue outlook came in above expectations. Also, the company announced a bigger buyback for CRM stock and touted plans to improve profit margins.
In addition, Salesforce also said it has disbanded a panel that explores mergers and acquisitions, implying it will make no more big acquisitions.
According to IBD Stock Checkup, CRM stock currently has a Relative Strength Rating of 93 out of a best-possible 99. The best stocks tend to have ratings of 80 and above.
In addition, CRM stock has an Accumulation/Distribution Rating of B. The rating analyzes price and volume changes in a stock over the past 13 weeks of trading. The rating, on an A+ to E scale, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
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