Why Salesforce's Stock Spiked After Sale Speculation

A few days ago, Salesforce.com (NYSE:CRM) shares were spiking 11.53% to $74.60. This was following a Bloomberg report claiming that the cloud software giant is contemplating a sale. According to the report, there is no guarantee that any deal will take place. Moreover, the report failed to mention any potential buyers.

Currently, Salesforce.com has a market value of approximately $44 billion. With this value, if the acquisition was to go through, it would stand out as the biggest takeover ever for a software company. Salesforce, based in San Francisco, provides customer relationship management solutions. It provides an array of cloud apps for businesses.

How quickly investment tides turn

Merely a couple of weeks ago, Salesforce announced stellar earnings. Shortly after being termed as “the fastest enterprise software company to $5 billion” in terms of revenue by its CEO, the company’s stock price went up to an all time fifty-two weeks high. Fast-forward to today and things are totally different.

According to analysts, the company’s earnings report was kind of premature. Adding fuel to the already big Salesforce’s fire, were the recent insider stock sales that included approximately $11 million worth of stock from the company’s CEO.

The questions that beg in most people’s mind are what really changed since the tech giant announced financial results two months ago? What could have occasioned the sell-off? What prompted the recent analyst downgrades? If you are a long-term investor, regardless of the current situation, the truth is that you stand to benefit from the situation because it presents better growth opportunity compared to a few weeks ago.

A real-time recap

As the CEO alluded a number of times during the company’s earnings call, its $5.37 billion in the current fiscal year was a record sitting performance. In fact, it was a whopping 33% improvement compared to the previous year. Deferred revenue (billed sales excluded from financial statements) also grew to $3.33 billion.

Expectedly, increased expenditures associated with incorporating new acquisitions, building new data centers and improving infrastructure took a toll on the company’s GAAP per-share earnings in the last quarter. The company’s $0.10 loss per share was totally in line with its estimates. This was just like its non-GAAP positive earnings of approximately $0.14 per share.

For the year, operating cash flow rose 34% to a remarkable $1. 17 billion. This helped boost Salesforce’s cash as well as equivalents to approximately $1.9 billion up from the previous year’s $1.33 billion.

Going forward

The recent launch of Salesforce’s wave analytics solution was one thing both the CEO and CFO were overly excited about. Salesforce’s analysis tool and data science took off faster than any other product. These growth drivers will surely propel Salesforce to greater heights in the stock markets.

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