Shares of the cloud-based customer relationship management (CRM) company Salesforce (NYSE: CRM) jumped almost 9% in Tuesday’s extended trading session after the company posted strong results for the first-quarter Fiscal 2023 (ended April 30).
The quarterly beat posted by the cloud software giant boosted investor confidence. Strong consumer demand across the portfolio of products resulted in margin expansion and an upward earnings guidance revision.
Meanwhile, management decreased its sales forecast for the year, citing foreign exchange challenges as the primary cause, albeit operational savings helped to raise profitability forecasts.
Results in Detail
Salesforce reported adjusted earnings of $0.98 per share, beating the Street’s estimates of $0.94 per share. The company recorded earnings of $1.21 per share in the same quarter last year.
Additionally, revenue surged 24% to $7.41 billion and surpassed analysts’ expectations of $7.38 billion. Results were supported by an uptick in subscription and support revenues as well as professional services and other revenues.
Adjusted operating margin stood at 17.6%, down from 20.2% in the prior-year quarter.
Existing Remaining Performance Obligation (RPO) stands at $21.5 billion, up 21% year-over-year. At the end of the first quarter, a total RPO of $42 billion indicates resilience and momentum in the company’s business.
As of April 30, 2022, total cash, cash equivalents, and marketable securities came in at $13.5 billion.
Official Comments
Looking forward, Salesforce Co-CEO Marc Benioff commented, “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.”
Guidance
For the second quarter of Fiscal 2023, the company expects revenue in the range of $7.69-$7.7 billion, compared with analysts’ expectations of $7.77 billion. Adjusted earnings are expected in the range of $1.01 to $1.02 per share, lower than the consensus estimate of $1.14.
For Fiscal 2023, Salesforce now expects revenue in the range of $31.7 billion to $31.8 billion, lower from its prior expectations of $32 billion to $32.1 billion. The consensus estimate is pegged at $32.06 billion.
Meanwhile, the adjusted earnings forecast is revised upward to the range of $4.74 to $4.76 per share, up from the previous forecast of $4.62 to $4.64 per share. The Street’s estimate stands at $4.66 per share.
The adjusted operating margin is revised upward by 40 basis points to 20.4% for the year.
Wall Street’s Take
Consensus among analysts is a Strong Buy based on 26 Buys versus three Holds. The average Salesforce price target of $256.11 implies 59.83% upside potential from current levels. Meanwhile, shares have lost 32.16% over the past year.
Website Traffic
TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), offered insight into Salesforce’s performance in the April quarter.
Supporting the upbeat quarterly results, the website traffic tool showed an uptrend in the website traffic. According to the tool, salesforce.com recorded a 10.52% year-over-year increase and 18.53% sequential rise in global estimated visits in Fiscal Q1 2023.
The predictions that were based on TipRanks’ website visits data turned out to be correct, with Salesforce reporting strong results in the quarter.
Bottom-Line
The company’s future growth potential is demonstrated by its upbeat quarterly performances and strong cash levels.
Also, website trends reflected on TipRanks’ Website Traffic Tool demonstrate strong customer engagement in the competitive environment. Additionally, TipRanks’ Hedge Fund Trading Activity tool shows that confidence in Salesforce is currently Very Positive, as the cumulative change in holdings across all 46 hedge funds that were active in the last quarter was an increase of 3.2 million shares.
Therefore, given the stock at an attractive entry point, investors may not be disappointed in building positions in Salesforce.
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