Salesforce Stock Up 5% in September – Time to Buy CRM Stock?
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
The price of Salesforce stock is up 5% in September following the release of the company’s Investor Day presentation in which the management raised its revenue guidance for the current 2022 fiscal year while it shared guidance for the full 2023 fiscal year that exceeded Wall Street consensus estimate.
According to the presentation, the software developer is now forecasting total sales of up to $26.35 billion for the 12 months ended on January 2022 – slightly higher than the full-year guidance provided during its Q2 2021 earnings release – while the company is predicting that it will surpass the $30 billion mask during the 2023 fiscal year at around $31.8 billion.
Moreover, Salesforce is anticipating non-GAAP operating margins of 20% (excluding the amortization of intangibles and stock-based compensation) and GAAP operating margins of 3.5%.
Can this upbeat report push the price of CRM stock to all-time highs? In the following article, I’ll attempt to answer that question by assessing the firm’s price action and fundamentals.
67% of all retail investor accounts lose money when trading CFDs with this provider.
Salesforce Stock – Technical Analysis
Salesforce stock is now approaching all-time highs as a result of yesterday’s pronounced 7.2% uptick. This single-day jump was accompanied by elevated trading volumes that exceeded the 10-day average by more than 2 times while it left behind a bullish gap that may now give the rally some legs.
It appears that the downtrend the stock experienced since September has been fully reversed already and that favors a bullish outlook for CRM stock as long as it manages to reach fresh all-time highs.
For now, the risk of a double top formation is there but the fact that this jump is coming on the back of what seems to be an improvement in the underlying business may support the continuation of the rally.
Moving forward, it would be positive to see the Relative Strength Index (RSI) posting a higher high as it has not yet climbed above its recent peak despite the price advancing to its highest level since September.
Moreover, the MACD has just moved above the signal line accompanied by the first positive histogram reading in the past 15 days at least. Additionally, the stock has broken above its short-term moving averages and all of these readings point to what could be the beginning of a strong bullish cycle as long as the price breaks above $285.
Salesforce Stock – Fundamental Analysis
Salesforce has been growing its top-line results at a rate of around 25% per year and this guidance indicates the continuation of this trend in both this current fiscal year and the next one.
Meanwhile, the company’s gross margins are quite attractive as they have stood above 73% in the past 5 years while its GAAP operating margins have moved from 2% to 4% during that same period and are expected to remain confined within that range in 2023 as well.
The acquisition of Slack should be adding over $1 billion in revenue to the firm for this upcoming 2023 fiscal year. That is not necessarily good news as it would indicate that core revenue growth is decelerating below 20%.
Moving forward, the firm’s ability to improve its operating margins could be the most important factor driving the price of the sock as Salesforce has already reached a stage of maturity where investors may demand better bottom-line results to keep pushing its valuation higher.
At its current market capitalization, Salesforce is being valued at nearly 9 times its forecasted sales for 2023 and that multiple seems particularly high based on the fact that top-line growth may be starting to decelerate while the company’s bottom-line margins are not improving at all.
The acquisition of Slack was considered bearish for the business back when it was announced as it remains an obstacle in Salesforce’s path toward achieving better profit margins.
Therefore, investors should keep an eye on the price action to see if the stock makes a double top as there have been little material improvements in the company’s fundamentals that may justify a sustained climb in its stock price.
Buy CRM Stock at eToro with 0% Commission Now!
