Customer relationship management software giant Salesforce (NASDAQ:CRM) shares down (-31%) in 2022. Salesforce is the largest company customer relationship software (CRM) company in the world through acquisitions, including Slack, Mulesoft, and Tableau. Despite macroeconomic uncertainty with inflationary and supply chain pressure, hybrid office, digital transformation and cloud migration are robust tailwinds for years to come. The company continues to grow its revenues by 24%, while strengthening its remaining performance obligation (RPOs) to $42 billion in fiscal Q1 2023. The company has survived through recessions, bear markets, financial collapses and global pandemics. Management claims to have seen no material impact of the weakening economic data as the demand environment remains strong. However, Salesforce has lowered both the top and bottom lines guidance ahead, although margins were increased from 20% to 20.4%. The company has resilient has survived every crisis of the last quarter of a century and has continued to grow for 72 consecutive quarters. Cautious investors with a long-term horizon seeking exposure in the world’s No. 1 CRM company can look forward to opportunistic pullbacks in Salesforce’s stock.
Fiscal Q1 2023 Profit Release
On March 1, 2022, Salesforce released its first quarter 2023 fiscal results for the quarter ended April 2022. The company reported earnings per share (EPS) of $0.98 versus earnings of $0.94 by consensus analysts , a profit of $0.04. Revenues were up 24.3% year-over-year (year-on-year) to $7.41 billion, better than analysts’ estimates of $7.38 billion. RPO ended the first quarter at approximately $42 billion, up 20% year over year. Total cash and cash equivalents at the end of the first quarter were $13.5 billion. The non-GAAP operating margin in the first quarter was 17.6%. Salesforce Co-CEO Mark Benioff commented, “There is no better measure of our resilience and momentum in our business than the $42 billion we have in remaining performance obligation, representing all future revenue under contract. We remain committed to consistent margin expansion and cash flow growth as part of our long-term plan to drive both top and bottom line performance.” Co-CEO Bret Taylor added: “Our financial results demonstrate once again the strength and sustainability of our business model as we continue to see strong customer demand across the entire Customer 360 portfolio. Salesforce has become even more strategic and relevant to our customers because we provide them with the flexibility and resilience they need to drive growth and efficiency in these uncertain economic times.”
Salesforce issued a downward outlook for fiscal 2023 second quarter earnings per share of $1.01 to $1.02 vs. $1.14 consensus estimates on revenue of $7.69 billion to $7.70 billion vs. 7.77 billion analyst estimates. Full year 2023 EPS is expected to be between $4.74 and $4.76 versus $4.66 by consensus estimates. Revenues are expected to be between $31.7 billion and $31.8 billion versus $32.06 billion by consensus analysts. The non-GAAP operating margin guidelines were increased from 20% to 20.4%.
Takeaway for conference calls
Co-CEO Benioff believes they are not yet seeing a material impact from the economic data. The demand environment remains very strong and the company has proven its resilience over the past 23 years. Salesforce has weathered dotcom crashes, recessions and financial collapses and is now able to weather global pandemics thanks to its incredible technology and business model. The company learned from 2001 when they nearly lost the business because they had monthly contracts and didn’t have the right cash flow structure. This led to many changes, including the Residual Performance Commitment (RPO), the best measure of company momentum, the strength of the technology and the sustainability of the business model. The RPO rose 20% year-over-year to $42 billion in fiscal Q1 2023. The outlook is lowered to meet headwinds from the currencies that have grown another $300 million to $600 million since Investor Day. He said it’s a great time to be a tourist in Japan with the strength of the US dollar, but the company is facing a (-12%) year-on-year headwind due to FX. Demand for its Customer 360 platform is incredibly healthy.
CRM Opportunistic Pullback Levels
Using the gun cards on the weekly and daily timeframes provides an accurate picture of the CRM inventory landscape. The weekly gun chart made a double bottom attempt at $154.57 Fibonacci (fib) level before organizing a rally to peak on the weekly market structure layer (MSL) buy trigger for $190.13. The stock has fallen again on the weekly inverse pup breakdown with a declining 5-period moving average (MA) resistance at $172.05 followed by the 15-period MA at $174.60. The weekly 200-period MA resistance is at $195.56. Weekly stochastics crossed back down through the 30 band. The weekly lower Bollinger Bands (BBs) are at $136.95. The daily gun chart has a tightening range as breakdown attempts on the 5-period MA crossover to $166.52 through the 15-period MA at $171.48 and 50-period MA at $169.76. The daily lower BBs sit at $153.22. The BBs have been in compression, which precedes expansion in the event of a breakout or failure. Daily stochastics have dropped through the 30 band. Cautious investors can look for opportunistic pullbacks at the $159.82 fib, $154.57 fib, $145.30 fib, $137.87, $132.10 fib, $124.24 fib and the $115, 29 fib level. Upward trajectories range from the $193.84 fib level to the $242.38 fib level. Investors can also check out peers Workday (NYSE:WDAY) and Splunk (NASDAQ:SPLK)
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