Salesforce (CRM - Free Report) stock has plummeted over the last month like many other tech powers as the broader market decline continues. The question is should investors consider buying shares of the cloud-based customer relationship management company ahead of its Q3 financial results that are due out Tuesday, November 27?
Salesforce boasts over 150,000 business clients, including giants from Adidas (ADDYY - Free Report) to U.S. Bancorp (USB - Free Report) . The company is one of the largest players in the quickly-expanding customer relationship management industry. Salesforce offers business clients a wide range of services that would otherwise require a ton of in-house computing power, technological infrastructure, and maintenance.
Salesforce could easily expand in a digital age as more businesses require sophisticated web-based platforms to help run sales, marketing, e-commerce, and much more. The San Francisco-based firm also offers Microsoft (MSFT - Free Report) Office-like products designed for the cloud to help it compete against MSFT and Google (GOOGL - Free Report) .
Salesforce recently introduced a new wrinkle to its Einstein artificial intelligence system called Einstein Voice, which allows users to conversationally update tasks. Clearly, Salesforce and some of its peers such as Adobe (ADBE - Free Report) , Oracle (ORCL - Free Report) , and VMware (VMW - Free Report) are likely to play an important role going forward. But we need to know what to expect from CRM stock in the near-term.
Shares of CRM have soared over 60% in the last two years, which comes in well above its industry’s roughly 23% jump and the S&P 500’s 22% climb. However, as we mentioned at the top, Salesforce stock has tumbled recently along with the likes of Amazon (AMZN - Free Report) and Apple (AAPL - Free Report) . CRM closed trading Monday at $121.01 per share, which marked a roughly 25% downturn compared to its 52-week and all-time high of $161.19 per share that it reached at the start of October.
Q3 Outlook & Earnings Trends
Looking ahead, Salesforce’s third-quarter revenues are projected to jump 25.7% to reach $3.37 billion, based on our current Zacks Consensus Estimate. The firm’s revenues grew 27% in Q2 and 25% in the year-ago quarter.
More specifically, Salesforce’s key subscription and support sales are projected to jump roughly 26% from $2.49 billion to $3.14 billion, based on our NFM estimates. Last quarter, sales jumped nearly 29% in the company’s biggest unit.
Salesforce’s professional services and other unit revenue is projected to hit $230.98 million, which would mark a roughly 19% jump from the prior-year quarter. Meanwhile, CRM’s current fiscal year revenues are expected to reach $13.17 billion, which would also represent a 25.7% jump.
At the bottom end of the income statement, Salesforce’s adjusted quarterly earnings are projected to climb by 28.2% to hit $0.50 per share. Better still, Salesforce’s adjusted full-year earnings are expected to skyrocket by 86% to reach $2.51 per share. Investors should note that Salesforce has received very few earnings estimate revisions recently, and none within the last 30 days.
Salesforce is currently a Zacks Rank #3 (Hold) and sports a “B” grade for Growth in our Style Scores system. The company also boasts some solid top and bottom-line growth estimates. But CRM's valuation picture is rather high, trading at 96X forward 12-month Zacks Consensus EPS estimates—this represents a massive premium compared to its industry’s 23.9X average and the S&P’s 16.1X.
CRM is also trending in the wrong direction along with many other tech stocks. With that said, Salesforce stock might be one to stay away from until we can figure out what’s going on in the broader market—which might end up presenting a better buying opportunity for a company that has many solid fundamentals.
Salesforce is scheduled to report its Q3 fiscal 2019 financial results after the market closes on Tuesday, November 27.
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