A hét részvénye: Salesforce (Angol hír)

Salesforce (CRM.US) jumped almost 10% on Wednesday while the broad US market had another poor session. Solid earnings report for the quarter ending April 30 provided fuel for the rally. However, was it good enough to snap a half year long downtrend? Let's take a closer look at the report and what it means for Salesforce and other cloud stocks. 

Solid fiscal Q1 2023 results

Salesforce reported better-than-expected earnings for the February-April quarter. Total revenue turned out to be slightly higher than expected and 24% year-over-year higher. While earnings also managed to beat expectations, a year-over-year drop in profits was reported. Operating margin deteriorated sharply compared to a year ago and it has weighed on earnings. However, the company said that it does not see any material impact of the current deteriorating macroeconomic environment on demand, what signals that the beginning of the second calendar quarter may not have been that bad.

• Total revenue: $7.41 billion vs $7.38 billion expected (+24% YoY)

• Subscription and support revenue: $6.86 billion vs $6.87 billion expected
  -Sales: $1.63 billion vs $1.61 billion expected
  -Services revenue: $1.76 billion vs $1.78 billion expected
  -Platform & other revenue: $1.42 billion vs $1.37 billion expected
  -Marketing & Commercial revenue: $1.09 billion vs $1.07 billion expected

• Professional services and other revenue: $555 million vs $513 million expected

• Adjusted EPS: $0.98 vs $0.95 expected (-19% YoY)

• Adjusted income from operations: $1.31 billion vs $1.30 billion expected

• Adjusted operating margin: 17.6% vs 17.6% expected (20.2% a year ago)

Salesforce sees higher margins

Results for fiscal Q1 2023 were better than expected but the scale of this beat wasn't significant enough to justify such a big share price jump. Spike in volatility was triggered by revision of forecasts for full fiscal-2023 (February 2022 - January 2023). Salesforce expects full-year revenue to reach $31.7-31.8 billion, down from a previous forecast of $32.0-32.1 billion. At the same time, the company expects its adjusted EPS to reach $4.74-4.76, up from a previous forecast of $4.64-4.68. This shows that while the company sees some slight deterioration in demand, it is also confident that it will be able to pass higher costs onto customers, and therefore increase margins. 

Salesforce expects fiscal-Q2 revenue to reach $7.69-7.70 billion (exp. $7.77 billion) and Q2 adjusted EPS to reach $1.01-1.02 (exp. $1.14).

Slowing M&A in the cloud sector? 

Salesforce earnings offer a mixed picture for the cloud sector. On one hand, a downgrade to revenue forecasts can be a source of concern as it shows that reality is not as bright as the company previously expected. On the other hand, an upgrade to earnings forecasts shows that the company is confident it can weather a near-term deterioration. 

What may be more interesting is the company's CEO comments on M&A actions. When asked about the matter in relation to current depressed valuations during the earnings call, executive said that the company is not actively looking at acquisitions right now and will focus on integration. Salesforce has recently acquired Slack and is integrating it into its structure so it sounds logical. However, Salesforce has been very active on M&A market, acquiring over 60 companies over the past two decades, so plans of not acquiring anymore in near-term may also be a sign of concern for the overall cloud M&A market.

A look at the chart

Salesforce (CRM.US) has been trading in a downtrend for half a year. Stock peaked in November 2021 and has lost half of its value over the next six months. However, an upgrade to full-year forecasts provided fuel for a share price jump. Salesforce gained almost 10% yesterday. Gains were even bigger at one point but the advance was halted by the 50-session moving average (green line). Should we see continuation of the move today and another, this time successful, attempt of breaking above the aforementioned moving average, the attention will shift to the resistance zone marked by the upper limit of local market geometry. Breaking above this market would boost bullish outlook and hint at technical trend reversal.

Source: xStation5