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Overview of Salesforce.com’s Recent Performance
Salesforce.com, a leading customer relationship management (CRM) software developer, has been a stock of significant interest among investors. Its performance in the recent period has drawn attention, prompting a closer look at factors that could influence its near-term trajectory.
Over the past month, Salesforce.com’s shares have declined by 0.9%, which is notably lower than the Zacks S&P 500 composite’s gain of 3.9%. The broader Zacks Computer – Software industry, to which Salesforce belongs, has seen a more robust increase of 6.8% during the same timeframe. This raises the question: where might the stock go from here?
Earnings Estimate Revisions
One of the key factors that investors and analysts closely monitor is the change in earnings estimates. At Zacks, we prioritize evaluating these changes because they reflect the evolving expectations for a company’s future profitability. When analysts revise their earnings projections upward, it often signals a positive outlook for the company’s stock.
For the current quarter, Salesforce.com is expected to report earnings of $2.77 per share, representing an 8.2% increase compared to the same period last year. The Zacks Consensus Estimate for this quarter has remained unchanged over the last 30 days.
Looking ahead, the consensus earnings estimate for the current fiscal year stands at $11.3, reflecting a 10.8% year-over-year increase. This estimate has also remained stable over the past month. For the next fiscal year, the estimate is $12.59, indicating a 11.5% growth from the previous year’s forecast. Over the past month, the estimate has increased slightly by 0.1%.
The Zacks Rank, a proprietary tool that assesses a stock’s potential based on earnings estimate revisions, currently assigns a #3 rating to Salesforce.com, which is categorized as a “Hold.” This suggests that the stock may perform in line with the broader market in the near term.
Projected Revenue Growth
While earnings growth is a critical indicator of a company’s financial health, revenue growth is equally important. A company cannot sustain long-term earnings growth without corresponding revenue expansion. Therefore, understanding a company’s revenue potential is essential for investors.
For the current quarter, Salesforce.com is projected to generate sales of $10.13 billion, marking an 8.7% increase from the same period last year. The estimates for the current and next fiscal years are $41.17 billion and $44.96 billion, respectively, reflecting growth rates of 8.6% and 9.2%.
Last Reported Results and Surprise History
In the most recent quarter, Salesforce.com reported revenues of $9.83 billion, a 7.6% increase from the previous year. Earnings per share (EPS) for the quarter were $2.58, up from $2.44 in the same period the prior year.
Compared to the Zacks Consensus Estimate of $9.74 billion, the reported revenues represent a positive surprise of 0.95%. The EPS surprise was even more favorable, at 1.57%. Over the last four quarters, Salesforce.com has exceeded consensus EPS estimates three times and surpassed revenue estimates three times as well.
Valuation Analysis
Valuation plays a crucial role in investment decisions. It is important to determine whether a stock’s current price accurately reflects the intrinsic value of the business and its growth prospects.
Key valuation metrics such as the price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF) ratios are used to compare a company’s current valuation to its historical levels and those of its peers. This helps investors assess whether the stock is fairly valued, overvalued, or undervalued.
Salesforce.com has been assigned a D rating on the Zacks Value Style Score, indicating that it is trading at a premium relative to its competitors. This score considers both traditional and unconventional valuation metrics to evaluate a stock’s potential.
Conclusion
The information presented here provides a comprehensive view of Salesforce.com’s current position in the market. While the stock has experienced some short-term volatility, its earnings estimates and revenue growth projections suggest a generally positive outlook. The Zacks Rank of #3 indicates that the stock is likely to perform in line with the broader market in the near term. Investors should consider these factors alongside their own investment goals and risk tolerance when making decisions about this stock.
