Salesforce surges 14% as investors rally behind better than expected earnings results

Salesforce (NYSE:CRM) crunched Q2 earning expectations posting an adjusted EPS of $1.44 in comparison to its expected EPS of $0.67. The software developer is set to open at $247.38 (14.5%) this morning according to pre-market. Salesforce is currently trading at all time highs, smashing its YTD stock value by 62.9%. It was recently announced the software giant will be added to the Dow Jones Industrial Average, replacing Exxon Mobil. This means CRM will be added to an elite list of 30 US companies, placing CRM alongside the likes of Apple (NASDAQ:Apple) and McDonalds (NYSE:MCD). There is significant prestige associated with Dow Jones inclusions. The Dow has a deep history of listing high caliber American corporations dating back to 1896. This is the icing on the cake for long-standing CRM investors.

Table of Contents 
1. CRM summary 
2. Salesforce Earnings breakdown 
3. Where to from here for Salesforce investors?

What we can take out of Salesforce Q2 Earnings

Key Takeaways

  1. Revenue of $5.15 Billion, up 29% YOY
  2. FY21 Revenue Guidance expected to increase by 21%, to $20.7 Billion
  3. EPS was positively impacted by unrealised return on their nCino investment ($617 million contribution)
  4. EPS guidance for Q3 of $0.73 (almost 50% decrease from Q2 EPS)
  5. Subscription revenues increased by 29% YOY
  6. Total cash, cash equivalents and marketable securities recorded at $9.28 billion
  7. Performance Obligation of $15.2 Billion, a 24% increase YOY. (Performance obligation is contract to provide a Good or Service in the future. This simply put suggests an increase in demand for CRM services.)

“It’s humbling to have had one of the best quarters in Salesforce’s history against the backdrop of multiple crises seriously affecting our communities around the world,”

said Marc Benioff, Chair and CEO of Salesforce. Read full report here.

Where to from here for Salesforce investors?

Before I begin I am obliged to remind our viewers that this is not advice but rather investment commentary from extensive research

This is most certainly an exciting time for CRM investors as Salesforce reach a golden era of growth. The Dow Jones inclusion and positive Q2 results are key drivers in the recent stock price growth. With tech giants such as Apple and Tesla reaching new heights in this recent market up-trend, there is no surprise that CRM is following a similar path. CRM’s services are well ingrained into the global market, with large corporations such as Telstra, Fisher and Paykel and Volkswagen currently using their services.

With CRM up 14% pre-market, we can expect a drawback over the coming days as speculators exit with short term intentions (opinion). Long term shareholders won’t take as much notice to this mornings surge, as the strong fundamentals remain the key focus. The lower Q3 EPS guidance at $0.73 may be a conservative move by CRM to undersell and over perform, however we will wait and see once Q3 results are in. This is definitely one to keep on your watch list.

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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.

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