During the past 15 years, Salesforce.com (NYSE:CRM) has been one of the best performers in the tech world. Keep in mind that the average annual return on CRM stock was an impressive 31%.
But lately things have not been so stellar. For example, the year-to-date return is 5%. This has lagged other mature tech companies like Microsoft (NASDAQ:MSFT), Adobe (NADAQ:ADBE) and even IBM (NYSE:IBM).
OK then, might Salesforce stock be an opportunity for investors now? Is this the right entry point? Well, perhaps so. In fact, we’ll get more details on Thursday on how things are tracking as the company will report its fiscal second-quarter results.
Here’s a look at the Wall Street expectations:
- For revenues, the consensus forecast is for $3.95 billion, up 20.4% from the same period a year ago. Keep in mind that CRM’s own forecast is for a range of $3.94 billion to $3.95 billion.
- Wall Street is looking for earnings to hit 47 cents a share. This compares to 39 cents a share a year ago.
As for the prior quarter, CRM posted revenues of $3.74 billion, up 24% on a year-over-year basis. There was also a nice 34% jump in operating cash flows to $1.97 billion.
What’s more, the company announced full-year guidance on revenues of $16.10 billion to $16.25 billion, for a growth rate of 21% to 22%.
An Eventual Quarter
The biggest event for CRM stock during the quarter was the $15 billion acquisition of Tableau, a top player in the analytics space. The deal is actually the largest in the company’s history.
Founded in 2003, Tableau focused on a new approach to analytics, with an attempt to disrupt the dominant legacy companies in the industry like IBM, SAP (NYSE:SAP) and Oracle (NYSE:ORCL). At the heart of the platform was a focus on interactive data visualization that seamlessly integrated with a myriad of databases and spreadsheets.
As for CRM, Tableau will become a key part of the Customer 360 analytics system. The deal will also provide a nice boost to the top-line (last year the revenues came to $1.16 billion).
But of course, there were other notable highlights for the quarter. Here’s a look at some:
- Salesforce shelled out $1.35 billion to acquire ClickSoftware Technologies, which is a provider of field service and workplace systems. The company will become part of the Service Cloud.
- A report from Forrester (NASDAQ:FORR) quantified the total economic impact and benefits of Salesforce Lightning for the Service Cloud. The result: there was a 475% return on investment over a three year period for a typical customer.
- Gartner (NYSE:IT) reported that Salesforce was positioned as a leader in its 2019 Magic Quadrant for Multiexperience Development Platforms.
Bottom Line for the CRM Stock Price
Salesforce.com has a knack for beating its numbers. And this upcoming report should be no different. If anything, the Tableau deal should be a help (at least for the guidance).
But the dealmaking will also be critical for the long-term of CRM stock. The focus on data companies is spot-on since this allows for the leveraging of next-generation technologies, especially AI (Artificial Intelligence).
In the meantime, Salesforce remains dominant in its core areas like CRM, service/support and marketing.
Then again, when it comes to CRM stock, it may not be realistic to expect the kinds of standout returns of prior years. The company is much more mature nowadays and it is getting tougher to gin up organic growth.
Regardless though, CRM still looks like a good choice for a core holding for investors that want exposure to enterprise categories like the cloud and AI.
Tom Taulli is the author of the book, Artificial Intelligence Basics: A Non-Technical Introduction. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.