Salesforce Shares Rise, Beating Both Top and Bottom Lines
Salesforce shares rise, beating both top and bottom lines, after reporting first quarter earnings. Extended trading on Tuesday saw a 3% rise in share price, with the stock up 9% for the year. Read more at CNBC.
Analyst take: There were trepidations within the analyst community following weak guidance from Salesforce at the end of their fiscal 2019 year. Those concerns were largely put to bed with the company beating the street on both revenue and earnings; with the earnings beat significant at more than 30 cents per share better than forecasted.
With “Service Cloud” crossing the billion dollar revenue mark for the first time, and an overall year-over-year revenue growth of more than 24%, the company is showing the ability to continue to grow despite continued concerns coming from investors and analysts alike.
The certain end to concerns can be clearly seen by looking at the ratings of the 43 analysts that track the Salesforce stock (CRM), who have all given the company a buy (40) or a hold (3) rating.
One area that was glossed over but that should be of concern to Salesforce is the rise of a formidable competitor. Back in late 2018, I pointed out in my MarketWatch column that Microsoft may be the company most poised to take share from Salesforce. You can read that article here: Salesforce is finally getting some real competition, and it’s from Microsoft. Reports are now showing that Microsoft is indeed grabbing some marketshare from Salesforce in the SMB space. With SMB long being a bread and butter area for Salesforce and an area where Microsoft’s CRM products haven’t always been as successful, this will be an area for Benioff and his team to keep an eye on.
Future guidance from Salesforce for the next quarter suggested much more modest earnings of around 46-47 cents per share on increased revenues of 3.94 billion.
It seems Salesforce is taking the approach of showing conservative earnings and then beating them handily, which is definitely one approach to playing the emotional Wall Street roller coaster. I wouldn’t be surprised to see much better actuals when Salesforce reports fiscal Q2 in September.
Futurum Research provides industry research and analysis. These columns are for educational purposes only and should not be considered in any way investment advice.
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