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Buy Salesforce Stock Now at a Discount for 2022 and Beyond?

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Salesforce (CRM - Free Report) stock tumbled after its third quarter fiscal 2022 financial release on November 30. Wall Street dumped the business software firm on the back of lower-than-projected near-term guidance and more.

Essential Software

Salesforce and its various subscription-based business software support sales, marketing, commerce, customer and client engagement, analytics, app development, and much. The company’s clientele continues to expand from government entities and giant corporations to smaller startups.  

Salesforce has posted between 25% and 30% revenue expansion in the trailing five years. Its steady double-digit expansion highlights the strength and consistency of its business model, as well as the constant need for companies of all shapes and sizes to adapt to the quickly changing tech-fueled business landscape.

Salesforce has also made two huge acquisitions in the last several years alone. The company bought Tableau in 2019 to improve its data-analytics side. And Salesforce completed its $28 billion Slack deal in July to help it thrive in the modern work communication environment.

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Post-Earnings Drop

Salesforce beat our adjusted Q3 earnings estimates by 38% and its revenue climbed 27%. The company also announced the appointment of new co-CEO Bret Taylor—who was COO since 2019—alongside Marc Benioff. The move returned the company to the co-chief executive structure it operated within for around two years until Keith Block step down in February 2020.

Wall Street appeared to show some discontent with the move. Investors also likely dropped CRM stock because its Q4 and first quarter fiscal 2023 consensus EPS estimates have slipped. Salesforce stock also got caught up in the broader wave of selling over the last week.

Other Fundamentals

Salesforce shares have dropped roughly 13% since its report and it closed regular trading hours Monday 17% below its early November records. CRM is now trading below where it was in August 2020 and nearly 25% beneath its current Zacks consensus price target.

Salesforce found buyers to prevent it from falling below its 200-day moving average and it still hovers right near oversold RSI levels (30 or under) at 32. The downturn has also helped recalibrate its valuation, though it might still be a bit rich for some.

Looking ahead, Zacks estimates call for Salesforce’s revenue to climb 24% this year and another 20% in its FY23 to $32 billion. Plus, its FY22 and FY23 Zacks consensus EPS estimates have popped since its report to help CRM land a Zacks Rank #1 (Strong Buy) right now.

Bottom Line

CRM has crushed our EPS estimates by an average of 44% in the last four periods, which could be a good sign since its near-term earnings growth outlook is somewhat disappointing. Luckily, Salesforce is still a growth-focused company that doesn’t pay a dividend.

Plus, 24 of the 28 brokerage recommendations Zacks has for Salesforce right now are “Strong Buys,” with nothing below a “Hold.” All that said, the pullback might set up a solid entry point for investors with longer-term horizons of 2022 and beyond.

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