Estimated read time: 3 minutes
Publication date: 3rd Jun 2022 13:25 GMT+1
Customer relationship management platform Salesforce, Inc. (NYSE: CRM) reported strong fiscal first-quarter results on Memorial day. The company was “born” during the 2001 recession, as it made several changes to its business model and improved cash flow structures following the aftermath of the dot-com bubble.
CRM’s impressive quarterly results have made it one of the most promising tech stocks on Wall Street. According to Wedbush analyst Dan Ives, “Salesforce earnings will be a big boost to bulls across tech.”
Salesforce reports quarterly results
In the first quarter of fiscal 2023, which ended on April 30, 2022, CRM’s total revenues increased 24% year-over-year to $7.41 billion. First-quarter revenues in constant currency, on the other hand, rose 26% year-over-year. This can be attributed to a 24% year-over-year increase in subscription and support revenues and a 30% rise in professional services and other revenues. Moreover, the company beat the FactSet consensus revenue estimate of $7.38 billion.
Cash generated from operations increased 14% from the prior-year quarter to $3.68 billion, while non-GAAP income from operations improved 8.45% year-over-year to $1.31 billion. However, the company’s non-GAAP net income declined 13.94% from the same period last year to $982 million.
Non-GAAP EPS amounted to $0.98 per share, compared to $1.21 earnings per share reported in the prior-year quarter. However, CRM surpassed the FactSet analyst estimates of $0.94 by 4.26%.
Salesforce Co-CEO Marc Benioff said, “We had another great quarter, delivering $7.4 billion in revenue, up 24% year-over-year … There is no greater measure of our resilience and the momentum in our business than the $42 billion we have in remaining performance obligation, representing all future revenue under contract. While delivering incredible growth at scale, we’re committed to consistent margin expansion and cash flow growth as part of our long-term plan to drive both top and bottom line performance.”
Salesforce provides earnings guidance
CRM slashed its revenue guidance for the remaining quarters and expects annual sales to range between $31.70 billion and $31.80 billion in fiscal 2023, which is lower compared to the previously announced range of $32 billion to $32.10 billion. In addition, the company expects revenues between $7.69 billion to $7.70 billion in the fiscal second quarter (ending July 2022), indicating a 21% growth year-over-year.
However, Salesforce expects its profit margins to improve in the current year. It raised it's fiscal 2023 non-GAAP operating margin guidance to 20.4%. Also, CRM expects its annual adjusted earnings per share to range between $4.74 and $4.76 in fiscal 2022, higher than the Refinitiv consensus estimates forecast between $4.62 and $4.64.
CRM announced its updated earnings guidance during its conference call. The company’s President and CFO, Amy Weaver, attributed the improved earnings guidance to “continued focus on disciplined decision-making across the organization, and as a company we are committed to continuing to improve profitability over the long-term.”
CRM stock has gained over 17% in the last two trading sessions, following its quarterly results. The momentum is likely to continue going forward, especially if the broader markets stage a turnaround.
What next for CRM stock and investors?
Salesforce Co-CEO Benioff accredited the company’s strong cash flows in the last quarter, and the prior year to the long-term changes it implemented back in 2001. Long-term annual or semi-annual contracts have allowed CRM to scale its growth and deliver impressive top-line and bottom-line performance.
Additionally, strong demand for its entire Customer 360 portfolio has been the major factor driving CRM’s growth in recent quarters. In fact, CRM ended the fiscal 2023 first quarter with $42 billion worth of remaining performance obligations, marking a 20% increase year-over-year.
Right now CRM stock is valued at 5.9x forward sales and a price to earnings multiple of 39.7x which is expensive. However, growth stocks command a premium, and CRM stock is trading at a discount of 32% to the average analyst price target.
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
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