Salesforce Gaps Up 5.43% On Triple Average Volume

Enterprise software maker Salesforce NYSE: CRM topped earnings and revenue estimates when it reported its fiscal 2022 first quarter. Shares gapped up 5.43% Friday, or $12.27, to close at $238.10. Trading volume was triple the average. 

The company reported earnings per share of $1.21, up 73% over the year-ago quarter, and beating analysts’ expectations for $0.88 per share. Revenue was $5.96 billion, a 23% year-over-year gain, and ahead of forecasts calling for $5.89 billion.

In the statement accompanying the report, CEO Marc Benioff said, “We had the best first quarter in our company’s history. We believe our Customer 360 platform is proving to be the most relevant technology for companies accelerating out of the pandemic. With incredible momentum throughout our core business, we’re raising our revenue guidance for this fiscal year by $250 million to approximately $26 billion and non-GAAP operating margin to 18 percent. We’re on our path to reach $50 billion in revenue in fiscal year 2026.”

The Customer 360 platform is Salesforce’s integration of sales, service, marketing, commerce, information technology and analytics, which gives its subscribers a multi-dimensional view of their own customers and business ventures. 

The company broke out revenue for its Tableau and MuleSoft units. Tableau, which was acquired in 2019, specializes in data visualization and analysis. It allows a business to easily understand metrics presented on a dashboard. 

MuleSoft, acquired in 2018, integrates different corporate tech structures so apps can be used in tandem. 

Salesforce reported revenue from the “platform and other” category was $1.747 billion, up from $1.364 a year ago. The company said subscription and support revenue from Tableau and MuleSoft combined represented 41% and 36%, respectively, of the “platform and other” category.  

Initiated Q2 Revenue Guidance

A big part of what got investors excited about the report was the forward-looking guidance. Salesforce raised its full-year operating margin guidance to 1.4% on a generally accepted accounting principles basis. 

It initiated second-quarter revenue guidance of $6.22 billion to $6.23 billion, which would mark a year-over-year gain of about 21%. 

Wall Street was also interested in the impact of Slack, an enterprise communications platform that Salesforce is in the process of acquiring, with an expected closing date in the current quarter. 

“Now, as we've refined our Q2 and full-year guidance, we have also refined our expectation on the Slack closing date, which we now expect to be near the very end of the quarter,” said chief financial officer Amy Weaver in the conference call. 

She added that the second-quarter revenue guidance assumes no contribution from Slack, which is expected to close late in the quarter.

Salesforce has been a solid growth story as businesses adopted cloud-based technologies over the past several years - well before the remote-work boom of the past year. 

Salesforce’s Biggest Acquisition 

Salesforce, which went public in 2004, has grown organically and through acquisition. The Slack acquisition, its biggest yet, valued at $27.7 billion, is expected to make a dent in earnings in the current quarter. Fiscal 2022 would mark the first earnings decline in several years, although growth is expected to resume in fiscal 2023. 

 The Slack acquisition is part of Salesforce’s plan to become the go-to enterprise software provider, not unlike the role Microsoft currently holds. 

Salesforce’s chart reveals a sloppy consolidation that began in mid-November, after a breakout from a double-bottom pattern failed.  

The 200-day moving average is currently above the 50-day line, which often happens when a stock has been languishing in a consolidation. When the 50-day line eventually crosses back above that longer-term price line, it could be a bullish signal of more gains to follow. 

Despite the consolidation, the stock is up 36.22% over the past year. Year-to-date the gain is 7% and over the past three months, it’s up 9.98%. A big chunk of those 2021 gains can be attributed to Friday’s upside momentum. 

Analysts’ consensus rating on the stock is “buy,” with a price target of $274.97, a 15.48% upside.