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Bull of the Day: Salesforce (CRM)

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Salesforce (CRM - Free Report) has seen its stock price jump over 12% in the last three months as the firm continues to bolster its cloud-based customer relationship management offerings. Looking ahead, Salesforce’s top and bottom line growth is something investors might not want to miss.

Overview & Recent News

Salesforce operates within the quickly growing customer relationship management industry that looks poised to become even popular as more businesses adapt to a nearly completely digital age. The company currently boasts over 150,000 business clients, including giants such as Adidas (ADDYY - Free Report) and U.S. Bancorp (USB - Free Report) , offering them a wide range of services that would otherwise require a ton of in-house computing power, technological infrastructure, and maintenance.   

Last quarter, Salesforce saw its revenues soar roughly 27% to reach $3.28 billion. The San Francisco-based firm recently announced that it upgraded its Financial Services Cloud to help companies offer a more unified customer experience. Salesforce also launched Quip Slides—an interactive slide presentation tool—to help it better compete against the likes of Microsoft (MSFT - Free Report) and Google (GOOGL - Free Report) .

Salesforce purchased Quip roughly two years ago, which helped the company roll out Microsoft Office-like products designed for the cloud from word processing to spreadsheets. Plus, the company announced on Thursday a new wrinkle to its Einstein artificial intelligence system called Einstein Voice. The service will allow users to conversationally update tasks on Salesforce, receive audible briefings, explore Salesforce’s dashboard, and more.

The move highlights the prevalence of voice assistants from Amazon’s (AMZN - Free Report) Alexa to Apple’s (AAPL - Free Report) Siri. “We're in the midst of an incredible technological shift, where the power of voice is fundamentally changing the way we work," Salesforce Co-Founder and CTO Parker Harris said in a company statement. “Einstein Voice will usher in a new era of conversational CRM, delivering new levels of productivity and redefining customer experiences with voice technology.”

Price Movement & Valuation

Shares of CRM have skyrocketed over 1,100% in the last decade, crushing its industry’s roughly 390% jump and the S&P 500’s 230% climb. Salesforce stock has surged over 64% in the last 12 months. This strong movement comes in well above its peer group’s—Adobe (ADBE - Free Report) , Oracle (ORCL - Free Report) , VMware (VMW - Free Report) —32% growth. Investors should note that shares of CRM currently sit near their 52-week and all-time high of $158.79.

 

Value investors might want to look away as we move onto Salesforce’s valuation picture since the company is currently trading at 122.8X forward 12-month Zacks Consensus EPS estimates. This represents a massive premium compared to its industry’s 27.2X average and the S&P’s 17.5X. With that said, most Salesforce investors don’t mind its sky-high P/E ratio because the company looks ready to keep on growing as it invests heavily in its future.

Outlook

Looking ahead, Salesforce’s third-quarter revenues are projected to climb by 25.7% to hit $3.37 billion, based on our current Zacks Consensus Estimate. Meanwhile, CRM’s fiscal 2019 revenues are expected to reach $13.17 billion, which would also represent a 25.7% jump.

Investors might be even more pleased to see that Salesforce’s adjusted quarterly earnings are projected to climb by 28.2% to hit $0.50 per share. Better still, Salesforce’s full-year EPS figure is expected to skyrocket by roughly 87% to reach $2.52 per share.  

Bottom Line

Salesforce has received 18 upward earnings estimate revisions for its current fiscal year over the last 30 days, against zero downward changes. During this same period, CRM has earned 14 earnings estimate revisions for the following fiscal year, with almost 100% agreement to the upside.

Salesforce’s positive earnings estimate revision activity helps the company earn a Zacks Rank #1 (Strong Buy) and an “A” grade for Momentum in our Style Scores system.

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