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Here's Why You Should Hold on to Salesforce (CRM) Stock Now
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A successful portfolio manager understands the importance of adding well-performing stocks at the right time. Indicators of a stock’s bullish run include a rise in its share price and strong fundamentals.
One such stock that investors need to hold on to right now is salesforce.com Inc. (CRM - Free Report) . Although there are a few concerns, these are short-lived. So, the stock has the potential to perform well in the long run.
The stock returned approximately 6.48% in the last three months, outperforming the Zacks categorized Computer-Software industry’s gain of 5.84%.
Let’s look at the reasons behind Salesforce’s solid momentum.
What’s Driving the Stock?
Salesforce started fiscal 2018 on a strong note with better-than-expected results for the fiscal first quarter. Although the company’s adjusted earnings marked a year-over-year decline, we are encouraged by the tremendous growth in revenues. The increase was primarily backed by growth across all its business segments and the Salesforce ExactTarget Marketing Cloud platform.
Going ahead, the company’s upbeat outlook for full fiscal signifies that it will continue to witness growth throughout the fiscal. Moreover, the fiscal second-quarter revenue outlook is impressive.
For the fiscal second quarter, the company anticipates revenues in the range of $2.51–$2.52 billion (mid-point: $2.515 billion), representing a year-over-year increase of 23–24%. The guided range is higher than the Zacks Consensus Estimate of $2.49 billion. Further, the company expects non-GAAP earnings per share in a band of 31–32 cents.
Moreover, the company raised its revenues and earnings outlook for fiscal 2018. Revenues are now anticipated to be in the range of $10.25–$10.35 billion (mid-point $10.3 billion), up from the previous projection of $10.15–$10.20 billion (mid-point $10.175 billion), representing 22–23% year-over-year increase. Moreover, it was above the Zacks Consensus Estimate of $10.25 billion.
By completing this target, the company will achieve $10 billion mark in revenues faster than any other enterprise software company.
Similarly, Salesforce now projects non-GAAP earnings to be between $1.28 and $1.30 compared with the previous guidance range of $1.27–$1.29 per share.
The higher number of deal wins and geographical contributions during the quarter were encouraging. We consider the rapid adoption of the Salesforce1 Customer Platform to be a positive. Overall, the company’s diverse cloud offerings and considerable spending on digital marketing remain catalysts. Additionally, strategic acquisitions and the resultant synergies are anticipated to prove conducive to growth over the long run.
In view of increasing customer adoption and satisfactory performances, market research firm, Gartner, acknowledged Salesforce as the leading social CRM solution provider. We believe that the rapid adoption of Salesforce’s platforms indicates solid growth opportunities in the ever-growing cloud computing segment.
Given that the company’s long-term earnings per share growth rate is 27.1% and has a Growth Style Score of “B”, we believe that the stock still has much upside potential.
Risks Remain
Although the company is growing reasonably in the cloud market, growth opportunities have been rationalized to a considerable extent due to intensifying competition from International Business Machines (IBM - Free Report) , Oracle Corp. (ORCL - Free Report) and SAP SE (SAP - Free Report) . Also, currency fluctuations and stepped-up investments in international expansion and data centers could impact near-term results.
Bottom Line
Keeping these positives in mind, we feel Salesforce is one such technology stock that deserves a place in investors’ portfolio. We can essentially filter the negatives and focus on the positives which drive price.
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
Image: Bigstock
Here's Why You Should Hold on to Salesforce (CRM) Stock Now
A successful portfolio manager understands the importance of adding well-performing stocks at the right time. Indicators of a stock’s bullish run include a rise in its share price and strong fundamentals.
One such stock that investors need to hold on to right now is salesforce.com Inc. (CRM - Free Report) . Although there are a few concerns, these are short-lived. So, the stock has the potential to perform well in the long run.
The stock returned approximately 6.48% in the last three months, outperforming the Zacks categorized Computer-Software industry’s gain of 5.84%.
Let’s look at the reasons behind Salesforce’s solid momentum.
What’s Driving the Stock?
Salesforce started fiscal 2018 on a strong note with better-than-expected results for the fiscal first quarter. Although the company’s adjusted earnings marked a year-over-year decline, we are encouraged by the tremendous growth in revenues. The increase was primarily backed by growth across all its business segments and the Salesforce ExactTarget Marketing Cloud platform.
Going ahead, the company’s upbeat outlook for full fiscal signifies that it will continue to witness growth throughout the fiscal. Moreover, the fiscal second-quarter revenue outlook is impressive.
For the fiscal second quarter, the company anticipates revenues in the range of $2.51–$2.52 billion (mid-point: $2.515 billion), representing a year-over-year increase of 23–24%. The guided range is higher than the Zacks Consensus Estimate of $2.49 billion. Further, the company expects non-GAAP earnings per share in a band of 31–32 cents.
Moreover, the company raised its revenues and earnings outlook for fiscal 2018. Revenues are now anticipated to be in the range of $10.25–$10.35 billion (mid-point $10.3 billion), up from the previous projection of $10.15–$10.20 billion (mid-point $10.175 billion), representing 22–23% year-over-year increase. Moreover, it was above the Zacks Consensus Estimate of $10.25 billion.
By completing this target, the company will achieve $10 billion mark in revenues faster than any other enterprise software company.
Similarly, Salesforce now projects non-GAAP earnings to be between $1.28 and $1.30 compared with the previous guidance range of $1.27–$1.29 per share.
The higher number of deal wins and geographical contributions during the quarter were encouraging. We consider the rapid adoption of the Salesforce1 Customer Platform to be a positive. Overall, the company’s diverse cloud offerings and considerable spending on digital marketing remain catalysts. Additionally, strategic acquisitions and the resultant synergies are anticipated to prove conducive to growth over the long run.
In view of increasing customer adoption and satisfactory performances, market research firm, Gartner, acknowledged Salesforce as the leading social CRM solution provider. We believe that the rapid adoption of Salesforce’s platforms indicates solid growth opportunities in the ever-growing cloud computing segment.
Given that the company’s long-term earnings per share growth rate is 27.1% and has a Growth Style Score of “B”, we believe that the stock still has much upside potential.
Risks Remain
Although the company is growing reasonably in the cloud market, growth opportunities have been rationalized to a considerable extent due to intensifying competition from International Business Machines (IBM - Free Report) , Oracle Corp. (ORCL - Free Report) and SAP SE (SAP - Free Report) . Also, currency fluctuations and stepped-up investments in international expansion and data centers could impact near-term results.
Bottom Line
Keeping these positives in mind, we feel Salesforce is one such technology stock that deserves a place in investors’ portfolio. We can essentially filter the negatives and focus on the positives which drive price.
Salesforcecarries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>