Shares of Salesforce Inc. were getting a boost in Tuesday morning action after the company announced what it said were its first price increases in seven years.
The software giant will boost prices by 9% across its Sales Cloud, Service Cloud, Marketing Cloud, Industries and Tableau products, with the changes slated to take effect in August.
The new list prices will rise to $80 from $75 for Professional Edition, to $165 from $150 for Enterprise Edition and to $330 from $300 for Unlimited Edition, Salesforce
CRM,
said in an update posted to its corporate site.
Salesforce shares, which recently changed hands just south of $218 and up 2.4% in Tuesday morning action, were jockeying to be the biggest gainer of the day within the Dow Jones Industrial Average
DJIA,
after rising as much as 4.5% earlier in the session. Shares of 3M Co.
MMM,
upgraded at BofA Global Research, were up 3.3% in morning action.
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“While there will clearly be some complaints from customers about the price increase, after a seven-year hiatus, we believe that a 9% increase is pretty reasonable given that other SaaS [software-as-a-service] companies have passed through annual increases in the 4-5% range,” Evercore ISI’s Kirk Materne wrote in a note to clients.
Materne flagged that, for big customers and those adding new modules, “the net impact will not be anywhere near 9%.” Materne wrote that he nonetheless thinks Salesforce’s pricing moves will serve as “a bit of a tailwind” for the company heading into the second half of fiscal 2024 and the first half of fiscal 2025.
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“While the core of the CRM bull case remains centered on the continued push higher in operating margins (and [free-cash flow]/share growth), we believe this was a sensible approach to pricing, especially in front of a new set of AI-infused products that are scheduled for release later in CY23,” Materne continued.
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Salesforce shares were rallying toward a nearly six-week high Tuesday.
This post was originally published on Market Watch
