Salesforce Shoots to a New High After Earnings

Stock (Symbol)

Salesforce.com (CRM)

Stock Price

$88

Sector

Technology

Data is as of

July 11, 2017

Expected to Report

Aug 29

Company Description

Salesforce.com, inc. is a provider of enterprise cloud computing solutions that include apps and platform services, as well as professional services. The Company focuses on customer relationship management (CRM). The Company offers six core cloud services that include sales force automation, customer service and support, marketing automation, community management, analytics and a cloud platform for building custom applications. Source: Thomson Financial

Sharek’s Take

Salesforce.com (CRM) shot to a new All-Time high after it reported earnings last qtr. But profits rose only 17%, and with a P/E of 68, isn’t the stock overvalued?. Well, no. The average of the median annual P/Es the past 8 years is 72. What Wall Street likes is CRM’s ability to grow its bread-and-butter Sales Cloud product (sales +15% last qtr) while getting more rapid growth off of line extensions like Marketing Cloud (+56%). Salesforce is the world’s leader in customer relationship management (CRM) software and connects more than 150,000 clients to their customers via the internet and stores this customer information in the cloud. Salesforce software is state of the art and in my opinion head-and-shoulders above its competitors. Not only does Salesforce tackle things like having your clients in a program that has details of when you spoke last and when you need to call them next, it goes way beyond that to address issues like working with a team on projects, or in my instance how much money a client has under management with you and how has the ballance grown (or declined) over time. And all the data is stored at Salesforce (the cloud). CRM continues to be a top growth stock in the market, and the company possesses great vision to grow into the future. Although the stock is close to my $95 2017 Fair Value, the upside to 2018’s Fair Value is 39%. In the end, I feel investors have to pony up and pay the higher price to get these quality shares, then hold for the long-term.

One Year Chart

Last qtr Salesforce grew sales 25% and profits 17% and beat analyst estimates for 8% growth. Profits weren’t as good as they normally were due to acquisition costs. After CRM reported, analysts left estimates fairly consistent with last qtr. Qtrly profit Estimates look great with 33%, 50% and 25% and 36% profit growth expected the next 4 qtrs. with NxtQtr’s reduced due to acquisitions. CRM has a solid Est. LTG of 28% per year and the P/E of 68 seems high but is less than it usually is.

Fair Value

Salesforce stock was $85 last qtr, is $88 this qtr, and is inching up to my $95 2017 Fair Value. Still, there’s massive upside to my 2018 Fair Value of $123.

Bottom Line

Salesforce’s ten-year chart is a thing of beauty. But some investors still think the stock could decline someday when it eventually gets a more realistic P/E ratio. But for now, the company continues to innovate and continue on its growth trajectory. CRM ranks 12th in the Growth Portfolio and Aggressive Growth Portfolio Power Rankings.