With shares of salesforce.com, inc. (NYSE:CRM) up more than 50% over the course of the past 12 months and up 18% just since the end of last year, it’s difficult to say they’re not technically overbought. Now may be a good time to take some profits on CRM stock, just as a matter of trading discipline.
Just don’t sit on the sidelines for too long.
See, even though Salesforce stock isn’t going to win any value awards anytime soon, it doesn’t need to. This is a story stock, but the story is a good one. You just have to take a step back and look at the bigger picture to fully appreciate it.
Adding Tools to the Toolbox
For the unfamiliar (and there aren’t many of them), Salesforce provides cloud-based customer management software, helping businesses better manage current and would-be clients. Its biggest competitor is a product from Microsoft Corporation (NASDAQ:MSFT) called Dynamics.
As one would expect, Microsoft has slowly but surely added bells and whistles to its platform, including integrating it with professional networking site LinkedIn. It’s impressive.
On balance, though, CRM is the better pick of the two, and not just because it’s a pure play on customer management tools. The company’s simply offering a superior product thanks to several bolt-on upgrades.
The latest of these is the acquisition of CloudCraze, a business-to-business (B2B) e-commerce solution that integrates seamlessly with Salesforce. Indeed, though the use of Salesforce isn’t a prerequisite for the use of CloudCraze’s e-commerce tools, the B2B platform was built from the ground up with Salesforce in mind.
And for perspective, The Coca-Cola Co (NYSE:KO), Symantec Corporation (NASDAQ:SYMC), General Electric Company (NYSE:GE) and a whole slew of other recognizable names already use CloudCraze. Clearly it’s doing something right that Salesforce can tap into.
CloudCraze is the company’s second smart acquisition of the year. It’s first one was January’s deal to buy Attic Labs, which has developed decentralized database software. It’s another savvy addition that ultimately makes Salesforce.com a more potent sales tool.
But it’s not just acquisitions. Salesforce is innovating as well, recognizing that constant evolving and renewal is the key to constant growth.
One of those upgrades is further integration of Dropbox’s team-collaboration service with Salesforce, unveiled earlier this month. Its most recent evolution, however, is a product called Essentials, which is a simplified version of its core products aimed at small businesses that’s arguably its best yet.
And it does mean small. Pricing on the new platform is $25/month per user for up to 10 users, which is one-third the cost of access to the full version of the platform.
It’s a market that — and this is the brilliant part of the plan — Microsoft hasn’t really tried to address with Dynamics. Microsoft’s service is considerably more expensive and appears to be aimed at medium-sized organizations. That may be a mistake on Microsoft’s part, though.
A little more than 17% of the country’s 28.8 million small businesses employ 19 or fewer people, and changes in the way commerce works are all but necessitating they rethink how they connect with customers.
Looking Ahead for CRM Stock
On the surface, all this deal-making, partnerships and product development simply look like business as usual. Customers expect ever-improving service, and they get it from Salesforce as well as its competitors. The compelling aspect of CRM isn’t the quantity of improvements and offerings it’s been adding to the menu, however. It’s the quality of them.
It’s admittedly difficult to see with just a superficial glance, but the integration of tools like those CloudCraze has developed are the natural progression of CRM platforms. Using artificial intelligence to easily and naturally get the most out of your customer data (which Salesforce does through its Einstein technology) is another natural extension of today’s capabilities.
The end result is constant and impressive growth. More important to current and would-be owners of CRM stock, however, is revenue and earnings progress that’s on the verge of pushing the company deeper into profitable territory than it’s ever been before.
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CRM stock is still not cheap. Even at next year’s expected non-GAAP-per-share profit of $2.05, the stock is still priced at a forward-looking P/E of 62.
It just doesn’t matter. This is a company that’s doing everything right. That and its fiscal trajectory can and likely will keep a fire lit beneath CRM stock, allowing for the usual ebb and flow all stocks experience.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.
