Salesforce.com Stock (CRM): Should I Buy It Now?

By Amit Chowdhry ● May 27, 2020
  • Should you buy Salesforce.com, Inc. (NYSE: CRM) stock now? Here is some information to help you decide.

Salesforce.com, Inc. (NYSE: CRM) will be reporting its first-quarter fiscal 2021 results on May 28. For the quarter, the company projected revenues of between $4.875 billion and $4.885 billion. That would be an increase of more than 30% and would be ahead of Wall Street expectations. Those numbers also include the results from Tableau Software, which is a company that Salesforce acquired last year.

Some of the variables that will affect Salesforce’s numbers for this quarter include reductions in software spending due to the COVID-19 pandemic. And the company is also facing intense competition from companies like Microsoft, Google, Oracle, and Amazon along with a number of smaller players. Due to those issues, Salesforce’s EPS is expected to fall more than 25%.

Another variable that Wall Street is watching closely in Salesforce’s numbers is a figure called current remaining performance obligations — which are the bookings for the company.

Salesforce.com, Inc. (NYSE: CRM) saw a number of major organizational changes in the past few months. For example, Keith Block had stepped down as co-CEO of the company. Marc Benioff now serves as Chair & CEO of Salesforce.com. And Gavin Patterson was promoted to president and CEO International of the company.

Recently, Salesforce.com, Inc. (NYSE: CRM) also appointed a new advisory board for supporting its EMEA unit. This new group will be headed by Salesforce President and Chief Strategy Officer Alexandre Dayon. The new board includes Stefan Heidenreich as vice-chair, Jayne-Anne Gadhia, Ana García Fau, Harald Krüger, Peter Löscher, Guillaume Pepy, Francesco Trapani, Véronique Weill, and Alexander Wynaendts.

“Tapping into the expertise of an advisory board of this caliber is essential as we navigate the unprecedented challenges that are reshaping our world,” said Patterson.

Should You Buy Salesforce.com, Inc. (NYSE: CRM) Now?

Based on the reports I have been reading, 86% of analysts are saying buy, 12% of analysts are saying hold, and 2% are saying sell. In another report, I am seeing that 3 analysts are saying strong buy, 7 are saying buy, 6 are neutral, 1 says sell, and 1 says strong sell.

Case From The Bulls

The bulls are saying that Salesforce dominates the sales force automation space, but it still only controls 30% in a highly fragmented market that continues to grow double digits every year so there is plenty of room to grow. And the company has been adding legs to its overall growth like customer service, marketing automation, AI, analytics, and e-commerce. Plus Salesforce.com’s margins are subscale with a runway to more than 100 basis points of operating expansion every year for the next decade.

Case From The Bears

The bears are saying that driving 20% revenue growth will likely become more difficult as the company gets larger and larger. And as Salesforce entered new areas through acquisitions, it has paid material premiums in the process so integration risk will be much more of a challenge.

Disclosure: I own a small number of Salesforce.com, Inc. (NYSE: CRM) shares. I wrote this article myself and I do not have any business relationship with any company whose stock I write about. I am not a financial advisor and all articles are my opinion. You should do your own due diligence and consider talking to a financial professional before investing.