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Information Technology : Software | Small Cap Value
Company profile

GSE Systems, Inc. is a provider of engineering services and technology, staffing, and simulation software to clients in the power and process industries. The Company’ segments include Engineering and Workforce Solutions. The Engineering segment encompasses its power plant fidelity simulation solutions, technical engineering services for American Society of Mechanical Engineers programs, power plant thermal performance optimization, and interactive computer-based tutorials/simulation. This segment includes various simulation products, engineering services, and operation training systems delivered across the industries it serves, primarily nuclear and fossil fuel power generation and the process industries. The Workforce Solutions segment supports entire project lifecycles and provides specialized capabilities throughout the energy and engineering industries. Its simulation solutions include software and services, including operator training systems, for the nuclear power industry.

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Salesforce's stock slumps as earnings show tech giant is 'no longer a growth software company'

8:09 am ET June 1, 2023 (MarketWatch)

By Emily Bary

Salesforce talks up AI, but some analysts are waiting to see how new initiatives manifest

Salesforce Inc. took its discussion of artificial intelligence "to new decibels" alongside its latest earnings, but that talk wasn't enough to help its stock.

Shares of Salesforce (CRM) were falling nearly 6% in Thursday's premarket activity after the software giant left its full-year revenue outlook unchanged, with an expectation for roughly 10% growth, indicating that management expected sluggish revenue trends to persist.

See also: Salesforce predicts record earnings, but the stock is still falling

"Salesforce is no longer a growth software company by virtually anyone's metrics and needs to be compared to other mature software companies on all the major metrics, including valuations," Bernstein analyst Mark Moerdler wrote after the report. "As such, under most metrics, Salesforce is quite expensive."

He noted that one issue for Salesforce in the latest quarter concerned its professional services business as some customers moved to smaller projects.

Guggenheim's John DiFucci commented that Salesforce was "executing on its margin target" but also pinpointed challenges on the revenue line, with "persisting deal pressure and elongated sales cycles." He said that Salesforce's 10% revenue growth in the Americas during the latest quarter marked "a historical 20+ year low."

Both analysts flagged a heightened level of AI discussion on Salesforce's earnings call -- not atypical for companies these days -- though they were waiting to see how those initiatives would manifest in the financials.

"[W]e will be keeping a close eye on upcoming announcements and unveilings before determining whether Salesforce's AI capabilities are truly additive or whether they are jumping onto the current hype cycle but lacking the substance to come out on top," Moerdler wrote, while maintaining an underperform rating on the stock but bumping up his price target to $153 from $145.

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John DiFucci of Guggenheim, who called out that AI talk reached "new decibels," also had questions about how Salesforce's efforts around generative AI would play out.

"It's unclear to us how Salesforce will monetize on its GenAI strategy, but we expect some combination of fixed and consumption-based pricing depending on the type of workload," he wrote, while sticking with his neutral rating on the shares.

Opinion: Nvidia created an AI bubble, and software stocks are already paying the price

FBN Securities analyst Shebly Seyrafi wrote that the latest report comes amid a sizable surge in Salesforce shares -- they've gained 68% so far this year -- that could impact how the earnings are viewed by Wall Street.

"There were several positives and a few concerns, and after the strong run in the stock over the past few months we wouldn't be surprised if there is some profit-taking today," he wrote.

Some of the positives, in his view, were that Salesforce topped expectations for subscriber revenue and saw "impressive" growth within its Mulesoft business. But on the negative side, Salesforce didn't lift its annual revenue forecast despite beating the consensus view in the most recent quarter, and the company saw marketing and commerce cloud subscription revenue slow meaningfully.

Seyrafi had an outperform rating on Salesforce's stock and raised his price target to $270 from $250.

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Raymond James analyst Brian Peterson also reiterated a bullish view on the stock as he kept a strong buy rating and boosted his price target to $260 from $240.

"While new business trends may not have been as strong as the broader bullish checks into the print, we believe the 12% cRPO [current remaining performance obligation] growth is actually quite encouraging" in light of "significantly scaled-back" spending on sales and marketing, he wrote.

Peterson said he was "cognizant" of Salesforce's robust year-to-date stock rally but said that the name's "valuation still looks quite attractive" at 20 times his updated expectations for calendar 2024 free-cash flow, based on after-hours prices.

-Emily Bary

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.


(END) Dow Jones Newswires

June 01, 2023 08:09 ET (12:09 GMT)

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