Although the U.S. economy showed slight hopes of a potential bullish trend as price increases subsided in recent months, the latest CPI data from January shows a 0.5% increase month-over-month, indicating that the inflation is still elevated and more work from the Fed is required. So, the bearish trend might stay for a while.
Nevertheless, investors have struggled to resist Salesforce, Inc. (CRM) due to its bright growth prospects, despite volatile macroeconomic conditions. CRM offers customer relationship management technology. Its Customer 360 platform enables its clients to cooperate and deliver connected experiences.
The company had expanded rapidly during the pandemic and the years before as cloud adoption skyrocketed. It also completed significant acquisitions such as Slack and Tableau.
Over the past three years, CRM’s revenue has grown at a 24.1% CAGR. During the same period, the company’s total assets and levered free cash flow have increased at CAGRs of 3.8% and 21.8%, respectively.
Shares of CRM have gained 6.9% over the past month and 11.6% over the past three months to close the last trading session at $161.62.
Here’s what could influence CRM’s performance in the upcoming months:
Positive Latest Developments
On January 12, 2023, CRM introduced several new improvements to aid retailers in increasing and optimizing advertising sales, gaining a comprehensive view of transactions across digital and physical stores, and deriving value from their customer data.
Additionally, on January 9, CRM and Playvox, one of the top providers of workforce engagement solutions, established a global partnership to enable CRM Service Cloud users to make real-time changes more swiftly based on Playvox’s AI insights while also effectively managing forecasting, adherence, capacity planning, and long-term scheduling within the CRM Contact Center.
Robust Financials
For the third quarter of the fiscal year 2023 (ended October 31, 2022), CRM’s total revenue grew 14.2% year-over-year to $7.84 billion, while its gross profit rose 14.5% from the year-ago value to $5.75 billion. The company’s non-GAAP income from operations came in at $1.78 billion, up 30.9% from the prior year’s period.
In addition, CRM’s non-GAAP net income rose 9.8% from the year-ago value to $1.40 billion, and its non-GAAP EPS grew 10.2% year-over-year to $1.40. Also, as of October 31, 2022, the company’s cash and cash equivalents stood at $6.08 billion, compared to $5.46 billion as of January 31, 2022.
Favorable Analyst Estimates
Analysts expect CRM’s revenue to increase 9.1% year-over-year to $8 billion for the fiscal 2023 fourth quarter (ended January 2023). The company’s EPS for the same quarter is expected to rise 62.3% from the previous year’s period to $1.36. Also, CRM surpassed its consensus revenue and EPS estimates in all four trailing quarters, which is impressive.
Furthermore, the company’s revenue and EPS for the ongoing fiscal 2024 first quarter (ending April 2023) are expected to grow 8.4% and 34.5% year-over-year to $8.04 billion and $1.32, respectively.
POWR Ratings Show Promise
CRM’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. CRM has an A grade for Growth and a B for Sentiment, consistent with its impressive financial performance in the last reported quarter and favorable analyst estimates.
CRM is ranked #26 out of 137 stocks in the Software - Application industry. Click here to access CRM’s Quality, Value, Momentum, and Stability ratings.
View all the top stocks in the Software – Application industry here.
Bottom Line
Software company CRM delivered double-digit top and bottom-line growth in the last reported quarter. Moreover, the company is closing more transformational deals and multi-cloud expansions, which should bolster its growth potential. Given CRM’s solid outlook, the stock could continue to surge whether there is a new bull market or not.
How Does Salesforce, Inc. (CRM) Stack up Against Its Peers?
CRM has an overall POWR Rating of B, equating to a Buy rating. Check out these other stocks within the Software – Application industry with an A (Strong Buy) rating: Progress Software Corporation (PRGS), Xperi Inc (XPER), and Open Text Corporation (OTEX).
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CRM shares were trading at $163.36 per share on Wednesday afternoon, up $1.74 (+1.08%). Year-to-date, CRM has gained 23.21%, versus a 4.41% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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