Customer relationship management software giant Salesforce (NASDAQ: CRM) shares fell (-31%) in 2022. Salesforce is the world’s largest enterprise customer relationship (CRM) software company through acquisitions such as Slack, Mulesoft, and Tableau. Despite macroeconomic uncertainty with inflationary and supply chain pressures, the hybrid office, digital transformation and cloud migration are strong headwinds for the coming years. The company continues to grow revenue at 24%, while increasing its remaining performance obligation (RPO) to $42 billion in the first fiscal quarter of 2023. The company has survived recessions, bear markets, financial meltdowns and global pandemics. Management says it has not seen any material impact from the weakness in economic data, as the demand environment remains strong. However, Salesforce lowered its top- and bottom-line guidance going forward, even as margins increased from 20% to 20.4%. The company has resiliently survived every crisis of the past quarter century and has continued to grow revenue for 72 consecutive quarters. Cautious investors with a long-term horizon looking for exposure to the world’s #1 CRM company can watch for opportunistic pullbacks in Salesforce stock.
Publication of results for the first fiscal quarter of 2023
On March 1, 2022, Salesforce released its fiscal first quarter 2023 results for the quarter ending April 2022. The company reported earnings per share (EPS) of $0.98 vs. $0.94 profit, up $0.04 from consensus analyst estimates. Revenue grew 24.3% year-over-year (YoY) to $7.41 billion, beating analysts’ estimates of $7.38 billion. RPO ended the first quarter at approximately $42 billion, an increase of 20% year-over-year. Total cash and cash equivalents at the end of the first quarter were $13.5 billion. Non-GAAP operating margin for the first quarter was 17.6%. Salesforce co-CEO Mark Benioff commented, “There is no greater measure of our resilience and the momentum of our business than the $42 billion we have in the remaining performance obligation, which represents all future revenue under contract. While we deliver incredible growth at scale,” We are committed to continued margin expansion and cash flow growth as part of our long-term plan to drive both superior performance co-CEO Bret Taylor added, “Our financial results once again demonstrate the strength and durability of our business model as we continue to see strong customer demand across the entire Customer 360 portfolio. Salesforce has become even more strategic and relevant to our customers as we provide them with the agility and resilience they need to drive growth and efficiency in these uncertain economic times.”
Salesforce issued downward guidance for fiscal 2Q23 EPS of $1.01 to $1.02 versus consensus estimates of $1.14 on revenue of $7.69 billion in $7.70 billion compared to analyst estimates of $7.77 billion. FY2023 EPS is expected to be between $4.74 and $4.76 vs. consensus estimates of $4.66. Revenue is expected to be between $31.7 billion and $31.8 billion, compared with analysts’ estimates of $32.06 billion. Non-GAAP operating margin guidance increased to 20.4% from 20%.
Co-CEO Benioff believes they are not yet seeing any material impact from the economic data. The demand environment remains very strong and the company has demonstrated its resilience over the past 23 years. Salesforce has been able to weather dot-com busts, recessions and financial crises, and now global pandemics because of its incredible technology and business model. The company found this out in 2001 when they almost lost business due to having monthly contracts and not having the right cash flow structure. This led to many changes, including the remaining performance obligation (RPO), which is the best measure of business momentum, technology strength and business model durability. RPO rose 20% year-over-year to $42 billion in Q1 FY23. Forward guidance is being cut to accommodate currency headwinds that have grown another $300 million to $600 million dollars since Investor Day. He mentioned that it is a good time to be a tourist in Japan with the strength of the US dollar, however, the company faces a headwind (-12%) year-on-year due to the change. Demand for its Customer 360 platform is incredibly healthy.
Opportunistic CRM withdrawal levels
Using rifle charts on weekly and daily timeframes provides an accurate view of the CRM stock landscape. The weekly rifle chart attempted a double bottom at $154.57 Fibonacci level (fib). before organizing a rally to reach the weekly peak Low Market Structure (MSL) buy trigger at $190.13. The stock has fallen again due to the weekly bearish reversal breakout with a 5-period moving average (MA) resistance to the downside at $172.05, followed by the 15-period MA at $174.60. The 200-period weekly MA resistance is at $195.56. The weekly stochastic moved back down around 30. The weekly lower Bollinger Bands (BB) is at $136.95. The daily rifle chart has a tightening range as the breakdown attempts from the 5-period MA at $166.52 to the 15-period MA at $171.48 and the 50-period MA at $169.76. Daily low BBs are at $153.22. BBs have been in compression that precedes expansion in a rupture or breakdown. The daily stochastic has fallen around the 30s. Cautious investors can look for opportunistic pullbacks at $159.82 fib, $154.57 fib, $145.30 fib, $137.87, $132.10 fib, $124.24 fib and the $115 level ,29 fib. The upward trajectories range from the $193.84 fib level to the $242.38 fib level. Investors can also look at peers Workday (NYSE: WDAY ) and Splunk (NASDAQ: SPLK )
Salesforce is part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.