Salesforce.com, Inc. (NYSE:CRM) defied earnings expectations for its third quarter, and shares responded in kind. CRM stock shot up 6% in early morning trading, putting shares back in the black for the year.
That shouldn’t have been much of a surprise. CRM has beat or met the Street’s consensus for years now.
For the third quarter, the cloud services provider grew revenue 25% year-over-year to $2.14 billion. Earnings improved 14% to 24 cents per share. Both figures beat estimates for $2.12 billion and 21 cents per share, respectively.
Better yet, CRM raised its full-year revenue guidance to a range of $8.36 billion to $8.37 billion. Analysts expected $8.31 billion. Earnings, too, are expected to surpass the consensus for 95 cents per share, landing around 97 cents to 98 cents for FY2017.
“We delivered another strong quarter of booked business on and off the balance sheet, which is now more than $12 billion, up 27% year-over-year,” said Salesforce CFO Mark Hawkins. “We are pleased to raise our fiscal full-year 2017 revenue guidance by $50 million to $8.375 billion at the high end of the range.”
CRM Stock Is a High-Growth Champion
Even after its improvement today, it still has another 20% upside to hit its $93.40 median price target. The fact that Salesforce has been so laggy is almost surprising, given the company’s prospects in the software as a service industry. One prediction in particular pegs SaaS revenues to hit $106 billion around the globe this year, and as much as $132 billion by 2020.
Salesforce did go through some lurching as investors essentially protested the potential acquisition of Twitter Inc (NYSE:TWTR) when the social media company was shopping itself around a couple months ago, and CRM stock has yet to reclaim its summer highs.
Still, Salesforce.com is on pace to deliver its first $10 billion year in 2018, according to CEO Mark Benioff. Benioff concludes that he expects to hit the $20 billion mark “faster than any other enterprise software company.”
Meanwhile, profitability isn’t a pipe dream. During the first nine months of 2015 and you’ll notice Salesforce posted a net loss of $21.9 million. During the same period this year, CRM logged net income of $231.1 million. Previously, CRM delivered annualized earnings growth of 23.4% over the past five years, but it’s currently tracking 30% earnings growth for the next five years.
That’s long-term, double-digit growth at a forward price-earnings ratio that’s pretty much on par with the industry.
CRM stock is up decently today, but that likely won’t be the end of its near-term gains.
As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.
