Salesforce (CRM) stock tacked on more than 4% in Friday’s morning trading after yesterday’s earnings report proved investors’ fear of slowing growth in CRM were overdone.
Shares of the San Francisco-based leader in cloud-based customer relationship management software were up 14% in 2015 through yesterday’s close, outperforming the S&P 500 by a full 15 percentage points.
While much of those gains were driven by speculation that CRM could be bought out by a larger rival — Microsoft (MSFT), Oracle (ORCL) and IBM (IBM) were all floated as potential acquirers — hopes for a deal have since waned.
And with the prospects of a deal now less likely, it’s more important than ever for Salesforce stock that the company prove its ability to grow organically.
Luckily for CRM investors, Salesforce earnings did just that yesterday:
“The Best Quarter That We’ve Ever Had”
CEO Marc Benioff didn’t mince words in the conference call yesterday, boasting that the second quarter of fiscal 2016 was the best quarter CRM had ever had.
Benioff’s confidence was nice for CRM investors to see, but at the end of the day, he didn’t have to say anything … the numbers did the talking.
Here are some highlights from the Salesforce earnings release:
- Revenue rose 24% year-over-year to $1.63 billion, beating the consensus $1.6 billion estimate and accelerating from last quarter’s 23% year-over-year increase.
- Adjusted earnings per share came in at 19 cents, up 46% year-over-year and above Street expectations for 18 cents.
- CRM raised FY 2016 (which ends Jan. 31) revenue guidance for a third time, from the $6.52 billion to $6.55 billion range, to the $6.6 billion to $6.63 billion range.
Pivotal Research upgraded CRM stock to a “buy” rating, boosting the Salesforce price target from $79 per share to $82 per share. I wouldn’t be shocked if other Wall Street research firms followed suit today. That $82 target represents a 20% premium to yesterday’s closing price of just below $68.
Importantly, Salesforce seems to be sticking it to rivals, especially Larry Ellison and ORCL. While Oracle’s famous chairman traditionally loves to talk smack about his competitors, the software giant hasn’t had much to brag about recently, especially after its most recent quarter showed a stagnant company struggling to grow.
ORCL stock instantly fell 8% after the weak quarterly results were released.
Good thing Salesforce CEO Marc Benioff isn’t afraid of a little verbal sparring himself. Benioff called out the cloud-based CRM operations of Ellison’s baby, saying, “In this area of the cloud, Oracle has not delivered.”
Benioff isn’t the only Salesforce bigwig talking smack, either. Vice Chairman and President Keith Block quipped yesterday of his company that, “We are selling billions of dollars of customer success platforms, and they are selling millions of dollars of something.”
Given the revenue and EPS beats, higher guidance and playful boasting, investors are right to be sending CRM stock higher today. After all, to get to the moon, you gotta go through the cloud.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at email@example.com.