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Salesforce Q2 Earnings Preview: Buy CRM Stock for Cloud Safety?

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Salesforce (CRM - Free Report) is one of the last big names in tech left to report, with its Q2 FY21 results due out on Tuesday, August 25. The cloud-based business software giant has lagged the broader tech space since the market’s March lows and it lowered its fiscal year outlook last quarter.

But is Salesforce still worth buying for cloud-based safety during the coronavirus uncertainty?

What’s Going On?

Salesforce’s Q1 sales jumped 30% and it topped our adjusted earnings estimate. Despite its ability to grow during the challenging environment, the firm lowered its fiscal year outlook amid coronavirus uncertainty. That said, its subscription-based cloud software offerings remain as vital as ever during the remote work landscape, and its Tableau acquisition—which it completed in August 2019—is expected to boost its data analytics business.

CRM shares have lagged the broader tech space since the market’s lows, up 43% vs. 57%. The stock currently trades just slightly below its 52-week highs and Salesforce’s 121% climb over the last three years outpaces the tech sector’s 60%. And CRM continues to trade at a premium compared to its industry.













Looking ahead, our Zacks estimates call for Salesforce’s Q2 revenue to jump 23%, with Q3 projected to pop 11% and fiscal 2021 set to climb 17.3%. Investors should note that CRM’s full-year estimate would mark its slowest sales growth as a public firm. For instance, CRM’s FY20 sales jumped 29%, with FY19 up 26%.

Meanwhile, Salesforce’s adjusted Q2 earnings are projected to pop 1.5%, with its FY21 figure expected to dip slightly. Salesforce has consistently topped our bottom-line estimates, but its earnings estimates are down from where they were before its first quarter report.

Some investors might want to simply hold off on Salesforce stock until it provides updated guidance on August 25, especially given last quarter’s subdued outlook.

That said, Salesforce could clearly post better-than-projected results and provide upbeat guidance next week. On top of that, overall third quarter earnings estimates have trended in the right direction, and tech giants from Apple (AAPL - Free Report) to Tesla (TSLA - Free Report) have proven resilient. Therefore, investors with a longer-term horizon might want to consider CRM stock.

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