By Brendan Gilmartin
Salesforce.com (CRM) is scheduled to report Q3 2013 earnings after the close of trading on Tuesday, Nov. 20, with a conference call to follow at 5:00 p.m. ET. The actual results are typically released at 4:05 p.m.
Outliers and Strategy
- Non-GAAP Earnings Per Share: For the second quarter, Salesforce.com previously indicated it expects to report non-GAAP EPS of approximately $0.31 to $0.32. The current Street estimate is $0.32 (source: Yahoo Finance).
- Revenues: Revenues are projected to be in the range of approximately $773 million to $777 million. The consensus on the Street is $776.5 million with estimates as high as $785.0 million.
- Adjusted Earnings Per Share Guidance (Q4 2013): In most cases, Salesforce.com provides earnings guidance for the upcoming quarter that tends to have a direct impact on the direction of the share price. The current estimate is $0.40.
- Adjusted Earnings Per Share Guidance (FY 2013): Look for Salesforce.com to give an updated outlook for 2013. The current estimate is $1.50.
- Revenues Guidance (FY 2013): Look for a possible update for 2013. The Street is targeting revenue of $3.03 billion. The company previously guided for $3.025 billion to $3.035 billion.
One of the major knocks against Salesforce.com is its lofty valuation at more than 72 times forward earnings and 18 times cash flow. These metrics are fairly rich, even with a 28% projected five-year earnings growth rate and gross margins near 80%.
- Nov. 19: According to a post on StreetInsider.com, Goldman Sachs reiterated a Buy rating and a $190 price target on Salesforce.com ahead of Q3 results. The firm recommended buying the shares on any pullback.
- Nov. 13: MKM Partners reportedly believes the impact of Hurricane Sandy could weigh on Salesforce.com's Q3 results, possibly resulting in slower quarter-end close rates and new signings, according to a post on StreetInsider.com. However, the firm notes that the push out to the fourth quarter could result in meaningful upside guidance. MKM carries a Buy rating and a $185 target.
- Oct. 31: Barrington Research started coverage on Salesforce.com with a Buy rating and a price target of $180, according to a post on Barron's. The positive view was based on growth with existing customers, enterprise revenue expansion, and increased market share in the customer relationship management segment.
- Oct. 18: Wedbush initiated coverage on Salesforce.com with an Outperform rating and a $195 price target according to a report on StreetInsider.com. The firm cited increased market share, new contract activity, revenue expansion, and margin growth.
Salesforce.com has been breaking out ahead of its Q3 2013 earnings release, pushing back through the 200-day SMA near $144.00. From here, there is meaningful resistance at the 50-day SMA near $150.00, followed by the "double top" near $160.00. Should earnings and guidance disappoint, look for support near the aforementioned $144.00, with downside risk to $140.00.
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Salesforce.com shares are edging higher ahead of Q3 2013 earnings, thanks to its dominant position in the CRM market, customer growth, push into enterprise, new products and services, and improving margins. While valuation remains a key concern (72 times forward earnings), Salesforce.com boasts impressive growth rates. Nonetheless, the bar is set pretty high and any missteps both in terms of Q3 and future outlook could have negative consequences given the positive sentiment surrounding the name.
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