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Salesforce: I Saw It Coming, And It's Still A Buy

Jun. 03, 2020 5:59 AM ETSalesforce, Inc. (CRM)41 Comments


  • I released a bullish note on Salesforce earlier this week, and I am following up with an analysis of the company's recent less than desirable earnings report.
  • While the company's reduced guidance isn't ideal, it serves to highlight why I always implement a margin of safety in any valuation I perform. "I saw it coming."
  • Now for the good stuff: Salesforce remains the #1 CRM service for the 7th year in a row.
  • Salesforce had $4.87 billion in revenue, a 30% increase year-over-year for Q1’20. The company inked a series of blockbuster deals, which I highlight in the article.
  • I reiterate my buy recommendation on Salesforce.
  • Looking for a portfolio of ideas like this one? Members of Beating the Market get exclusive access to our model portfolio. Get started today »

Source: www.technologyadvice.com


In my recent Salesforce article, I discussed Salesforce's (NYSE:CRM) acquisitive streak and its CEO Mark Benioff’s vision to make the company's comprehensive client relationship management software an essential part of large enterprises around the globe. As we are all aware, the virus has negatively impacted most businesses from a financial perspective, including Salesforce. Notwithstanding, during this time, Salesforce has invested in its customers and by extension its own business by aiding the transition of businesses even further into the cloud.

That is, Salesforce, as it has always done, has gone on the offensive while others stand flatfooted. But as they say, it takes money to make money, and there have been and will be financial repercussions due to the virus.

I attended Salesforce's recent earnings report, and today, I am going to share the information that I gathered. Interestingly, the company reduced guidance, but, as you can see in our recent Salesforce article, we had already accounted for this through very conservative assumptions about growth. It's our margin of safety at work! A truly beautiful sight to see.

During a volatile quarter (Q1 2020), Salesforce provided decent results and revealed an interesting new project, i.e., work.com, which is going to be vital for governments and businesses' reopenings (just another example of Salesforce going on the offensive). While the world roils in a time of uncertainty regarding the economy and the virus, something certain is that the transition to digital will remain a central component of all businesses' plans moving forward, and Salesforce will reap the rewards of this accelerated digital transformation.

What We Will Cover

Today, I am going to highlight:

  • How Salesforce worked with its businesses during the depths of the virus and how this will pay off down the road (especially as manifested in work.com).

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This article was written by

Louis Stevens profile picture

Louis Stevens purchases high quality, industry-defining businesses, with giant cash hoards, little to no debt, and robust free cash flow.

He buys what he understands in the Consumer Discretionary, Financial Technology, and Software industries.

Louis runs the investing group Beating the Market, which specifically focuses on purchasing the best businesses on earth within these industries. Learn more.

Analyst’s Disclosure: I am/we are long CRM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (41)

Hudson Investments profile picture
Despite the author @louis Stevens being long CRM some very encouraging points were made and this makes me want to invest more in the company.

I feel Benioff was sandbagging guidance, which BTW, is still not illegal or unethical.
Louis Stevens profile picture
Check out how we are playing the greatest secular growth trend of the 21st century (and no, it's not 5G):

KamilAgrawala profile picture
long since 90. I do think the reason their stock price is undervalued is the markets response to costly acquisitions. Tableau, Mulesoft & ClickSoftware were all done back to back, and thats asking a lot from shareholders to digest. One other thing is how much is organic growth vs acquisition growth ? Salesforce is a leader in the industry, and therefore a hold for me right now.
Is CRM really undervalued at 170-180? How do you come to that? What price would be 'right' for you?
Louis Stevens profile picture

Hi Laww, I think I can be of service to you.

I demonstrate exactly how to find the "right price" in our marketplace through in-depth video walkthroughs where I perform financial analysis.

Try us out for free:

yieldhunter196 profile picture
Agree. Strong company! 💪🏻
Your article title is a turnoff. Sorry, but that is how "I" feel.
Louis Stevens profile picture

Hi Pippy54,

Why is it a turnoff to you?
@Louis Stevens You don't need so much "I saw it coming". People who follow you know your articles and what you recommended and why, there's no need to brag about it =)

Thanks for the article and keep up the good work!
Louis Stevens profile picture
@tiagolimp @Pippy54

Thank you, tiagolimp, for this, as I genuinely did not understand what he was getting at.

It certainly wasn't meant to brag. I meant it as a response to the many bearish articles that came out post earnings that highlighted the growth deceleration, and I also meant it as a means to highlight our process in valuing stocks.

Thanks again for your insight!!
Buyandhold 2012 profile picture
With a PEG of 3.00 Salesforce is still a buy?

That violates my never buy a stock with a PEG higher than 2.00 rule.
@Buyandhold 2012 Good thing it's around 1 now lol
Neurology profile picture
I like your articles and thought process, Mr Stevens, but find it a touch ironic invoking "beat the market like buffet" given that the geezer doesn't know jack about tech stocks and wont invest in them. Good day to you!
Buyandhold 2012 profile picture

Show some respect for Warren Buffett.

"...given that the geezer doesn't know jack about tech stocks and won't invest in them."

I think he invested in Apple and Amazon.

And the price of Berkshire Hathaway was $13 in 1965. It's $279,000 now.
Louis Stevens profile picture

We are working on the marketing. We recognize that this is misleading.

Thanks for your thoughts.
2030.... Usually we only go out 3 to 5 years on dcf. I wonder too about the Data acquisition. Maybe that has been talked about too much, but they had to double the bs anly received about +10% in revenue - can it ever pay for itself?

Thought provoking article, I'm going to keep coming back to this one.
Louis Stevens profile picture

Hi phinze,

The value of any asset is the present value of the cash flows it generates over its lifetime.

Honestly, I don't much care for most DCFs, including most of the ones I create.

Just not surgical enough.
Ed Bickford, CPA profile picture
@Louis Stevens That's an interesting comment about the current asset prices we are seeing. So many stocks are being bought at levels far in excess of present value of future cash flows. Do you have a better method of deciding where to buy?
Louis Stevens profile picture
@Ed Bickford, CPA

Yes, Ed, I share it with my subscribers in BTM.

It's also in all my articles, but the calculations are done in the LASV model, which is here:

The CEO is spending too much time being a SJW and diverting focus from his company and his shareholders. I had sold earlier this year at $190. Moved into other cloud stocks, most into NOW
Louis Stevens profile picture

I have been buying a lot of NOW this year as well.

I like both. Both are Silicon Valley titans.
You're welcome. CRM is still a very good company. I just like others in the sector better now.
Archstanton1 profile picture
I' m sorry but I cant get past the stupidity of making everything virtual over what is being exposed more as each day passes as basically the flu with a different name and a pathetic lickspittle press corps eager to peddle the propaganda that has fools and suckers believing that this is some kind of airborn pancreatic cancer killing 95% of those it infects rather than a virus not unfamiliar to experts in such things as SARS was one such virus the difference being no Chicken Little Fake News Media to peddle propaganda then and thus no chicken shit corporations eager to win the most chicken shit company of the year award for its pathetic pandering. Imagine what a great company it would be to invest in which had found a cure or at least a vaccine for stupidity the deadliest of all pandemics in human history....
Chris Valley profile picture
So you are short software, but you're looking to go long on lickspittle at this time?

Can you please share your entire lickfolio?
Watch someone come into the hospital walking/ talking, then transition to supplemental oxygenation then intubation and cytokine storm, then require proning. Then come back and call it the flu with a different name. Have some respect for the people that are dealing with it firsthand
You could have just said “very bad stuff” instead of cytokine. You’re talking to SA readers after all. They come here, then they go to Robinhood to buy CCL.
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