CRM Stock: Will Salesforce.com, Inc. Go Soaring Into the Clouds Soon?

Advertisement

Salesforce.com, Inc. (CRM) stock owners haven’t had much to brag about in 2016, with shares down 1% on the year. Almost six months into the year, the S&P 500 is not doing much either, but at least it’s in the black, up 1.3%.

CRM Stock: Will Salesforce.com, Inc. Go Soaring Into the Clouds Soon?CRM stock has a far more impressive record when you go out one-, five-, and 10 years, though, with shares up 7%, 130%, and 891%, respectively.

Shareholders are looking for more magic like that on Wednesday, when the cloud company, famous for its customer relationship management software, reports fiscal first-quarter earnings after the bell.

CRM Stock: A Study in Extremes

Sometimes you can get a crack out of perusing the financial media around earnings season and noting the wide discrepancy in what the pundits have to say about the yet-to-be-reported quarter. The water cooler talk on CRM stock was no different.

A headline in The Country Caller, a gaming, finance and technology-focused site that aims to become “the world’s most widely-read publication,” ran a headline saying Salesforce was putting out a “strong vibe” before Q1. A Benzinga article published just hours later cautioned investors to expect a “softer” Q1 from CRM.

No offense to the future source of the world’s news, but the latter headline is probably a little more accurate. Salesforce reported a great Q4, and analysts believe some Q1 sales were dragged forward into Q4.

Wall Street expects revenue to jump 25.2% year-over-year to $1.89 billion in the first quarter of fiscal 2017, while CRM stock can expect adjusted earnings per share of 23 cents, up nearly 44% from Q1 of fiscal year 2016.

According to Citi analyst Walter Pritchard:

“While 1Q16 billings likely grow mid-teens percent y/y — a substantial deceleration from ~30 percent y/y in 4Q16, we remind investors this is due to magnitude of 4Q strength and more amplified seasonality.”

Longer-term, CRM stock investors hope that Salesforce will be able to diversify its revenue streams; the company recently announced a nascent Internet of Things service powered by Amazon.com, Inc.‘s (AMZN) Amazon Web Services.

With the Internet of Things widely expected to be a mega-industry of huge growth in the future, and with the powerful cloud services of AWS, a market leader in its own right, investors have reason to be optimistic.

First quarter results will serve as an important snapshot for investors, but shareholders should be far more interested in how the long-term plan plays out.

Salesforce has big ambitions; it recently hired 800 people, it’s the anchor tenant at the upcoming 1,070-foot Salesforce tower in San Francisco and it’s shifting its business away from Oracle Corporation‘s (ORCL) famed database services, partly because the two companies compete.

With a forward P/E around 60 right now, investors will have to count on solid execution and increasing margins for CRM stock to continue posting market-beating returns.

As of this writing, John Divine was long AMZN stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2016/05/crm-stock-salesforce-com-inc-q1/.

©2024 InvestorPlace Media, LLC