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Is Salesforce a Buy Heading Into Earnings?
Salesforce.com (NYSE:CRM) releases its second-quarter results this week, on Aug. 25, after the markets close. Year to date, shares of the tech company have risen 15%, slightly below the S&P 500’s gains of 18% over the same period. Today, the stock is trading at more than 50 times its earnings and 11 times revenue. It’s not a cheap stock but what makes Salesforce an attractive by for growth investors is its ability to continually find ways to grow.
Last quarter, the company reported revenue of $5.96 billion for the period ending April 30. It was a year-over-year increase of 23%. For the second quarter, it anticipates revenue to grow around 21% and come in around $6.22 billion and $6.23 billion. The company’s long-term projection is that revenue will top $50 billion in fiscal 2026. That’s more than double the $21 billion it reported in fiscal 2021.
One way the company has grown is via acquisitions and on July 21, it officially completed its purchase of Slack, a company that facilitates collaboration and is popular for its group messaging service. The acquisition won’t give much of a boost to Salesforce’s numbers this coming quarter as the second quarter will only go up until the end of July. But longer term it could play a much bigger role in the company’s growth.
Salesforce can be a volatile stock on earnings day even though it has consistently beat Wall Street’s estimates for sales and earnings. The key thing to impact where the stock will likely be the guidance and how well the Slack integration is going. Salesforce makes for a promising long-term buy, but given its high valuation and the softness in the markets recently, if you’re betting on a big rally on earnings day, you could be disappointed.
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