Thursday, July 18, 2024

Salesforce stock drops despite strong earnings report


Salesforce shares fell in late trading Wednesday, despite the company reporting better-than-expected results for its fiscal first quarter ending April 30.

Investors may be disappointed that the company didn’t boost its full-year revenue forecast despite an outperforming first quarter.

Salesforce shares fell 3.2% in late trading after the earnings report.

In the first quarter, Salesforce (stock ticker: CRM) reported revenue of $8.25 billion, up 11% from a year ago, or 13% in constant currency. That’s just above the top of the company’s guidance range of $8.18 billion and the Wall Street consensus of $8.14 billion.

On an adjusted basis, the company earned $1.69 a share, 8 cents better than the top of the guidance range and 10 cents better than the Street consensus. Under generally accepted accounting rules, the company earned 20 cents a share for the quarter.

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For the July quarter, Salesforce expects revenue of $8.51 billion to $8.53 billion, up 10%, and matching Wall Street’s forecast of $8.49 billion. The company reiterated its full-year revenue guidance from $34.5 billion to $34.7 billion but raised its forecast for operating margins for the full year.

This is breaking news. Read a preview of Salesforce earnings below and check back for more analysis soon.

As you may recall, Salesforce had a huge quarter in January, which saw better-than-expected results, and lifted guidance. And this was just the beginning. Salesforce, a leader in cloud-based enterprise software, has unveiled an expanded stock repurchase program. It also created a board-level “Business Transformation Committee”, after five activist investors acquired stakes in the company. The board then dissolved a committee focused on mergers and acquisitions.

Add in a few recent announcements about the company’s plans for artificial intelligence, and the stage is set for a big move.

In fact, Salesforce stock is up 32% since the company reported its last earnings on March 1.

Evercore ISI analyst Kirk Mattern wrote in a note Wednesday before replay that he “don’t expect many surprises” on the Salesforce earnings call. He thinks margins will be slightly higher than Street estimates, and added that CRPO — current residual performance obligations, a measure of future work — should rise about 11%, which should be good enough for investors.

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Matteran adds that the Street wants to see evidence that the company can continue to grow 10% in the future. Given the recent rally, Mattern writes that “the question at these levels” is whether there will be a sudden growth driver in the second half and beyond, and in particular whether the company can monetize its AI initiatives.

Wedbush analyst Dan Ives is more optimistic. He believes the company will post a “modest uptick” in street numbers. He is also optimistic about the company’s moves in the field of artificial intelligence. “We believe this is a significant land grab opportunity that could significantly benefit CRM over the coming years and could increase overall revenue in excess of $4 billion annually … by 2025,” Ives wrote in the earnings preview note.

Write to Eric J. Savitz at [email protected]

Rosario Tejeda
Rosario Tejeda
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