By Todd McDonald, analyst
Salesforce.com (NYSE:CRM) is scheduled to report Q1 2014 earnings after the close of trading on Thursday, May 23. A conference call will follow at 5:00 p.m. ET. The actual results are typically released at 4:05 p.m. ET.
Outliers and Strategy
- Non-GAAP Earnings Per Share: For the first quarter 2014 period, Salesforce previously said it expects to report non-GAAP EPS of approximately $0.40 to $0.42, which translates to $0.10 to $0.11 after the 4-for-1 stock split. The current Street estimate is $0.10. (Source: Yahoo Finance.)
- Revenues: Revenue is projected to be in the range of approximately $882 million to $887 million. The consensus on the Street is $887.08 million with estimates as high as $892.6 million.
- Adjusted Earnings Per Share Guidance (Q2 2014): In most cases, Salesforce 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 $0.12.
- Adjusted Earnings Per Share Guidance (FY 2014): In the Q4 2013 earnings release, Salesforce.com gave guidance for FY 2014 in the range of $1.93 to $1.97. After a 4-for-1 stock split, this equates to approximately $0.48 to $0.50 per share -- which is right in line with Street estimates.
- Revenues Guidance: In the Q4 2013 release, the company issued revenues guidance in the range of $3.82 billion to $3.87 billion. The current Street estimate is toward the high end of the range, at $3.87 billion.
- Implied Volatility: The average move for the past eight quarters has been approximately 7%. Options premiums are pricing in a bit more of a move this quarter, at about 7.5%.
- May 20: According to a post on Barrons.com, Morgan Stanley reiterated its Overweight rating on Salesforce.com, citing strong billings growth, valuation, and the outperformance of SaaS enterprise software.
- May 16: Wedbush reiterated its Outperform rating on Salesforce.com, with a price target of $51, according to a post on StreetInsider.com. The firm points to solid growth in Sales Cloud and force.com. The firm sees EPS and revenues a bit above consensus.
- May 8: Goldman Sachs reiterated its Buy rating on Salesforce.com, according to a post on StreetInsider.com. The firm believes that it is a top long-term pick due to the secular cloud movement. Analysts expect the company to raise FY 2014 guidance.
- March 21: Salesforce.com announced that the board of directors approved a 4-for-1 stock split.
Salesforce.com has underperformed the broader market YTD (up about 10% vs. S&P 500 gains of about 18%). The RSI is currently at an oversold level, signaling the potential for a near-term pullback. The all-time high was set just a few days ago at $47.58, which should be used an initial point of resistance. The next level to watch should be near $49, which is the high end of the range of implied volatility. Should earning disappoint, look for support near $44, followed by the 50-day SMA near $43.
Salesforce.com is just shy of its 52-week high, thanks in part to an improving economic backdrop, an attractive valuation, transparent and consistent billings growth, and a strong enterprise push into cloud services. Given the recent run-up, the upcoming report has to impress. Look for numbers near the high end of the range, coupled with an increase in FY 2014 revenues and adjusted EPS guidance for a buy signal.
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