Salesforce Rallies Into Earnings

As the coronavirus precipitated a massive cultural shift in tech employees working from home, companies that support non-contact business interactions like Docusign (NASDAQ: DOCU), Zoom Video (NASDAQ: ZM) and Okta (NASDAQ: OKTA) have all seen their shares rally to all time highs. This in turn has fed business through to other ancillary tech companies like Salesforce (NASDAQ: CRM), whose cloud based customer relationship management platform is in hot demand when other companies are doing well.

And so despite a 40% drop from all time highs in just four weeks as equities were dumped en masse back in March, shares of Salesforce are back above those levels already. A 3.7% jump on Tuesday suggests that they’re going to continue seeing a strong bid all the way into next week’s earnings.

Industry Leader

The recent acceleration in the digital transformation, brought about by COVID, will continue to benefit Salesforce in the coming months and years. They are by far and away the standout leader in their space and in many ways have come to define what a CRM is. Alternatives are measured against and spoken of in terms of Salesforce’s platform and its wide range functionalities.

Their last earnings report in May showed just how strong their market position is. The $180 billion company was able to report revenue growth of 30% year on year with core subscription revenues up about the same. Even management cutting their revenue and EPS estimates for the year wasn’t enough to deter investors and shares are up 15% since then.

Salesforce CEO Marc Benioff summed up their performance well when he said "our results, amidst this global crisis, demonstrated our ability to execute at speed, innovate at scale and the strength of our business model. We made long-term investments in keeping our employees safe, supporting our customers, delivering crucial innovation like Work.com, and helping our communities with PPE, grants, and technology. The pandemic showed us that digital is an imperative for every company, and we're confident Salesforce will continue to accelerate as we bring our customers into the new normal."

The $10 billion they reported in cash and equivalents can give investors confidence that they’re well able to ride out any short term slowdown and are looking further ahead than the second half of 2020. Headlines from last week suggest that the $10 billion will have increased by next week’s report. A regulatory filing showed that the company recently sold all of its 2.8 million shares in Zoom Video, locking in somewhere around a 300-600% profit on their investment. They also unloaded their stake in Dropbox (NASDAQ: DBX) and would have made a pretty penny there as well.

Strong Earnings Record

Going into next week’s report, the company offers investors a solid track record of beating expectations and has done so over at least the last 10 consecutive quarters. Investors looking to get involved before, or after, next week’s earnings have a solid upward trend to work an entry around. Shares are less than 3% away from last week’s all-time high and are likely to test this in the coming days as interest and anticipation grows.

Despite being around for longer than many of the tech companies they serve, Salesforce is a classic tech stock of the 21st century and has the stock chart to prove it. They’ve carved out an industry and have come to define it while still managing to post double digit percentage revenue growth. Whatever the numbers are next week, this is a stock you want to own for the long term as every tech company, and many non-tech companies need their software.