The cloud computing service as a software (SaaS) company, Salesforce, Inc. (CRM), is scheduled to release its fiscal 2024 third quarter financial results on November 29. Wall Street expects the company to report quarterly earnings of $2.06 per share, a 46.9% year-over-year improvement.
Its revenue for the same period is expected to be $8.72 billion, up 11.3% from the prior year’s period. Before examining CRM’s fundamentals, let's look at the recent developments that could influence the company's future performance.
On September 12, CRM unveiled its collaboration with Williams-Sonoma, Inc. (WSM), the globe's premier digital-first, design-driven, and eco-conscious home retailer, aiming to provide precisely tailored and profoundly personalized customer experiences on a global scale, signifying a pivotal stride in customer engagement.
The partnership entails the integration of CRM's proprietary technology with its suite of products, facilitating the establishment of a comprehensive 360-degree perspective on customers throughout WSM's expansive array of brands. This synergy would elevate CRM’s customer engagement by harnessing advanced analytics and tailored solutions.
Simultaneously, CRM and Google disclosed an augmentation of their strategic alliance, fusing AI-powered Customer Relationship Management (CRM) with Google Workspace, the globally acclaimed productivity tool. The alliance streamlines workflows, enabling users to merge CRM insights with Workspace functionalities seamlessly.
Beyond enhancing user experience, the partnership would position CRM to capitalize on Google Workspace's broad user base, resulting in increased market standing and revenue growth.
On the same day, the company unveiled the latest iteration of Einstein, its AI technology. Einstein Copilot is a revolutionary generative AI-powered conversational assistant that seamlessly integrates into all CRM applications, optimizing workflow for substantial productivity gains.
Einstein Copilot, coupled with Data Cloud, simplifies the creation of potent AI assistants, effortlessly infusing trusted AI into the workflow across diverse sectors and roles, ensuring an accessible and impactful integration for every business and industry. Such launches could elevate the company’s product portfolio and bolster its growth.
Shares of CRM have gained 14% over the past month and 46.3% over the past year to close the last trading session at $224.79.
Here are the financial aspects of CRM that could influence its performance in the near term:
Solid Financials
For the fiscal 2024 second quarter that ended July 31, 2023, CRM’s revenues increased 11.4% year-over-year to $8.60 billion. Its non-GAAP income from operations rose 77.1% from the year-ago value to $2.72 billion.
In addition, the company’s non-GAAP net income and non-GAAP net income per share grew 76% and 78.2% from the prior year’s period to $2.09 billion and $2.12, respectively.
Sound Historical Growth
Over the past three years, CRM’s revenue and EBITDA increased at 19.5% and 40.5% CAGR, respectively. Its normalized net income and total assets grew at a CAGR of 287.8% and 17%, respectively. In addition, the company's levered free cash flow rose at a 21.4% CAGR over the same time frame.
Positive Analyst Estimates
The consensus revenue estimate of $34.77 billion for the fiscal year ending January 2024 reflects a 10.9% year-over-year improvement. Likewise, the consensus EPS estimate of $8.07 for the ongoing year indicates a 53.9% rise from the previous year. Moreover, the company topped the consensus revenue and EPS estimates in all four trailing quarters.
Discounted Valuation
In terms of forward EV/EBIT, CRM is trading at 21.01x, 9.6% higher than the industry average of 19.17x. However, its forward non-GAAP PEG of 1.10x is 41.6% lower than the 1.89x industry average. Also, CRM’s forward Price/Book of 3.57x is 6.2% lower than the 3.80x industry average.
Robust Profitability
CRM’s trailing-12-month gross profit margin of 74.52% is 53.1% higher than the industry average of 48.67%. Its trailing-12-month EBITDA margin of 23.30% is 157% higher than the 9.07% industry average. Also, the stock’s net income margin of 4.77% compares to the 1.77% industry average.
Furthermore, CRM’s trailing-12-month ROCE, ROTC, and ROTA of 2.67%, 3.67%, and 1.71% compare to the industry averages of 0.80%, 2.60% and 0.07%, respectively.
POWR Ratings Show Promise
CRM’s strong outlook is reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong 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, in sync with its solid past growth record. In addition, it has a B grade for Quality, justified by its higher-than-industry profitability.
CRM is ranked #11 in the 132-stock Software - Application industry. Click here to access CRM’s Value, Momentum, Stability, and Sentiment ratings.
Bottom Line
The collaborative ventures, strategic alliances, and innovative launches collectively position CRM for substantial growth by leveraging advanced analytics, tailored solutions, and seamless integrations to enhance customer engagement, streamline workflows, and drive productivity across various industries.
Additionally, optimistic analyst estimates, robust profitability, and strong financials suggest a favorable outlook, which could make the stock a solid buy ahead of its upcoming earnings release.
How Does Salesforce, Inc. (CRM) Stack Up Against Its Peers?
While CRM has an overall grade of A, equating to a Strong Buy rating, you may also check out these other A-rated stocks within the Software - Application industry: Commvault Systems, Inc. (CVLT), TeamViewer SE (TMVWY), and eGain Corporation (EGAN). For exploring more A-rated Software - Application stocks, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
CRM shares were trading at $225.20 per share on Tuesday afternoon, up $0.41 (+0.18%). Year-to-date, CRM has gained 69.85%, versus a 20.50% 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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