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More than most, Salesforce.com’s fourth-quarter earnings — scheduled for release after the market close Wednesday — could help bring an end to what one analyst calls “the beatdown that growth software stocks endured for about 45 days.” “We believe that last week probably marked a bottom, or close to a bottom” for software companies that “are down about 25% for the average stock,” wrote Canaccord Genuity analyst Richard Davis in a research note Sunday. “Deals are getting a bit more scrutiny than before, but we believe we are nowhere near anything that looks like an IT spending clampdown. We are broadly optimistic on the outlook for next-generation software companies.” Salesforce ( CRM ) stock hit a 16-month low at 52.60 on Feb. 8, then rose 22% through Monday’s close at 63.98. Salesforce stock was down a fraction, near 63.50, in afternoon trading in the stock market today . That’s 23% off the stock’s all-time high of 82.90, hit Nov. 19, after Salesforce reported fiscal-third-quarter earnings up 50%. Salesforce is a cloud software pioneer and the No. 1 maker of customer relationship management software. Salesforce is coming off many years of double-digit revenue growth and seven consecutive quarters of double- or triple-digit earnings-per-share gains, year over year. Its market cap at $42 billion makes it half the size of SAP ( SAP ), the largest in IBD’s Computer Software-Enterprise industry group, and much smaller than business software giant Oracle ( ORCL ), with its $154.7 billion market cap. But Salesforce is much larger than next-generation cloud software companies Workday ( WDAY ), ServiceNow ( NOW ), Ultimate Software ( ULTI ) and others. Salesforce’s fiscal Q4 2016, which ended in January, should make it eight consecutive quarters of double-digit-or-better earnings growth. Analysts polled by Thomson Reuters expect Salesforce to report earnings up 36% to 19 cents per share minus items, on revenue up 24% to $1.79 billion. Salesforce had guided Q4 to adjusted EPS of 18 to 19 cents on sales up 24% at the midpoint. Earnings especially were a tough comparison to follow, as EPS had doubled to 14 cents in fiscal Q4 of 2015. For the current Q1 2017 ending in April, Wall Street models EPS up 31% to 21 cents ex items, on revenue up 23% to $1.861 billion. Salesforce CEO Marc Benioff said at the Q3 analyst conference: “We expect to deliver our first $8 billion year during our fiscal year 2017, which puts us well on the path to reach $10 billion faster than any other enterprise software company.” The company’s Salesforce1 platform for mobile-application development should spark growth, RBC Capital Markets analyst Ross MacMillan said in a research note Sunday, although “there are many avenues to sustain growth, including service and marketing, the platform, and international and future initiatives. “While deceleration is inevitable, we think Salesforce can continue to drive premium growth for its size, and it remains an important strategic asset.” RBC maintains an outperform rating on Salesforce.com stock, with an 80 price target, as “one of the best positioned companies in large-cap software.” Scalper1 News
Scalper1 News