The king of customer relationship management (CRM), Salesforce CRM, is preparing to release its Q4 earnings (ending on January 31st) after the bell Tuesday, February 25th. This is one of the most attractive enterprise-cloud stocks on the market, with 26 out of 27 analysts calling CRM a buy. This positive sentiment will be put to the test tonight.
CRM has been a big mover on earning with the past 8 quarterly reports having an average price movement of 4.4% (5 up, 3 down). Zacks Consensus estimates are projecting an EPS of $0.55 on sales of $4.75 billion, representing an EPS decline due to integration costs but a 32% sales appreciation.
Salesforce is an acquisition machine with 61 total acquisitions made since its inception 21 years ago. It made 6 acquisitions in 2019, including the roughly $16 billion Tableau acquisition that is allowing Salesforce to leverage data more intelligently. The company has a very comprehensive set of enterprise solutions and has been very successful in harnessing the synergies of each acquisition.
In tonight’s earnings call, look for management to mention any color on the progression on the integration of its recent acquisitions and how Salesforce has been leveraging their synergies.
This enterprise has a healthy-looking balance sheet with $6.5 billion in cash & equivalents as well as consistent positive free-cash-flows that gives this firm the financial flexibility to continue acquiring and grow organically.
Salesforce controls over 17% of the CRM space, with its closest competitors Oracle ORCL, SAP SAP, and Microsoft MSFT holding only a fraction of that market share. Below is a graphic from Salesforce’s most recent investor relations presentation illustrating this point.
CRM has fallen a few percentage points over the past few days of trading, which could pose a buying opportunity for this attractive cloud stock. The stock is up over 1% in morning trading, which might be a sign of positive news to come. Personally, I would wait for tonight's earnings report to show its feathers before putting on a position.
Salesforce is toeing the line of profitability, but it looks like its accelerating topline and margin expansion should position the firm for strong profitability this year. The enterprises diligent investor relations team has guided the markets quite accurately in the past so look for management’s guidance and acquisition integration timelines to move the share price in tonight’s earnings.
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