After the market closes today, Salesforce.com (NYSE:CRM) will announce its fiscal third-quarter results, and the report will certainly be important for CRM stock, since the recent selloff of the equities markets has been particularly hard on cloud operators. Just look at the steep declines of Docusign (NASDAQ:DOCU), Zuora (NYSE:ZUO) and Okta (NASDAQ:OKTA).
It’s true that Salesforce stock hasn’t dropped as sharply as those other names, but it still entered a bear market. Since late September, CRM stock has gone from $160 to $126. In fact, the market cap of CRM stock has dropped below $100 billion.
For Salesforce’s fiscal Q3, Wall Street is expecting the company’s top line to come in at $3.37 billion, up from $2.68 billion in the same period in 2017. Analysts’ consensus earnings per share estimate for CRM is 50 cents.
For the most part, CRM has a pretty good track record when it comes to earnings. But this time, the company’s results and outlook will definitely be critical. Even CRM’s aggressive M&A strategy will not enable it to easily keep up its torrid growth rate.
CRM Stock and Dreamforce
Last quarter, CRM had its annual Dreamforce mega conference. The conference has become the mecca of the cloud industry. At this year’s conference, there were a whopping 171,000 registered attendees from 83 countries. Just about every hotel in San Francisco was sold out during the conference!
CRM unveiled multiple products and made many announcements during the gathering. Here’s a list of the highlights:
- Salesforce Customer 360: This technology enables users to easily view customer data across different clouds.
- MuleSoft Anypoint Platform: This system, which CRM obtained from a recent acquisition, creates a network graph for all customers. The graph conveys information on systems, apps and metadata.
- Einstein Voice: This is an Artificial Intelligence (AI) technology that provides users with personalized briefings from a mobile app or smart speaker.
- iOS: Salesforce.com announced a strategic relationship with Apple (NASDAQ:AAPL) that makes it possible to create native mobile apps.
- Cloud Power: Salesforce.com expanded its relationship with Amazon.com’s (NASDAQ:AMZN) AWS platform, which will include more integrations.
- Quip Slides: This is a new collaboration product, which provides a single, unified canvas that enables teams to work in together real time.
Also last quarter, there was an important deal that could impact CRM stock: that is, SAP’s (NASDAQ:SAP) $8 billion acquisition of Qualtrics International, which is a provider of market analytics systems. Essentially, SAP made the deal to get a bigger piece of the customer relationship management market.
Granted, Salesforce.com has been able to regularly beat its existing competition. But then again, there are certainly customers that would like to see a new alternative to CRM.
With the acquisition, SAP is showing that it is willing to make bold moves. The company also has some key advantages, like a customer base of 413,000 and a sales team of about 15,000. And over 170 million enterprises use its cloud.
SAP CEO Bill McDermott told The Wall Street Journal: “SAP has made a determination, from which we will not bend or waver, to take over the CRM marketplace.”
The Bottom Line on CRM Stock
CRM stock has been quite reliable. During the past ten years, Salesforce stock has generated average annual returns of 33.14%.
But expectations for the company’s results are a bit high. In other words, with the markets on edge, CRM stock will probably not regain its momentum unless the company reports standout earnings.
Tom Taulli is the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.