Salesforce (NYSE:CRM) CRM shares are down 11% from their early September highs heading into the release of the company’s third quarter fiscal 2021 financial results on Tuesday, December 1. The cloud-based business software firm is one of the last big names in tech left to report and Wall Street will be watching closely to see if there might be reasons to buy the recently under-performing stock.
Recent News…
Right off the bat, investors should know that Salesforce is reportedly in advanced talks to buy business-focused communication platform Slack WORK. The deal would be its largest-ever acquisition and help Salesforce diversify its portfolio for a workplace that becomes more digitally-focused by the day.
Salesforce would gain a Microsoft MSFT competitor as it tries to dive deeper into the business communication world, as companies expand beyond email. And CRM’s potential deal could become more important if the remote-work and schooling environment that’s helped Zoom Video ZM and others continues for much longer (also read: Buy Zoom Stock on the Dip).
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Some Fundamentals
Slack stock soared nearly 40% after the news broke earlier in the week, while Salesforce shares dipped. As we mentioned at the top, CRM shares are down around 11% from their early September highs, but are still up over 50% in 2020. Salesforce shares have swung below and above their 50-day moving average over the last month and currently hover just below at around $248. This could give CRM room to climb if it’s able to impress Wall Street.
The stock did soar last quarter after it crushed our adjusted earnings estimate by 115%. One of the newest Dow members saw its Q2 revenue jump 29%, while its EPS figure soared 120%. Looking ahead, Zacks estimates call for Salesforce’s third quarter revenue to climb over 16% to come in at $5.25 billion. Meanwhile, its adjusted earnings are projected to dip 1.3% to hit $0.74 a share.
Overall, CRM’s full-year fiscal 2021 revenue is to projected to pop 21.5% to $20.77 billion, with FY22 projected to come in another 17.4% or $3.6 billion higher. CRM’s adjusted FY21 earnings are expected to jump 25%, but its FY22 EPS are projected to come in slightly below our current-year estimate.
Wall Street might be a bit down on Salesforce stock recently because its top-line projections would mark a significant slowdown from recent years. That said, the nearby chart showcases that CRM has crushed the tech industry over the last five years, up 210% vs. 125%. It also highlights that CRM has experienced some significant sideways movement during this stretch.
Salesforce continues to trade at an extremely high forward earnings multiple. But in terms of forward 12-month sales, it actually trades at a slight discount against Microsoft at 9.5X vs. 9.9X.
Bottom Line
Salesforce’s subscription-based cloud software, which offers clients a range of tools and applications to help run everything from sales and e-commerce to marketing and analytics, has become widely popular over the last decade-plus. And it remains a powerhouse in the broader SaaS world that businesses, big and small, have come to depend on.
Salesforce is currently a Zacks Rank #3 (Hold) and its Computer – Software space rests in the bottom 30% of our over 250 Zacks industries. CRM doesn’t pay a dividend, as it continues to spend money on its growth. Yet, investors with a longer-term horizon might want to consider buying Salesforce even if there is some near-term uncertainty with the stock.
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