CRM - Salesforce stock price analysis: CRM has formed a bullish pattern
2024-05-27 21:03:00 ET
Salesforce (NYSE: CRM) stock price will be in the spotlight this week after the Dow Jones company publishes its financial results. These numbers will come at a time when the shares have moved into a deep correction as they plunged by over 14% from their highest point this year. The stock is also hovering near its lowest point since January.
Salesforce earnings ahead
Salesforce, the biggest customer relations company, has been in a strong growth trajectory over the years. Its annual revenue has moved from over $17 billion in 2019 to over $34 billion in the last financial year.
At the same time, its annual net income has moved from over $126 million to over $4.1 billion. This growth happened both organically and through acquisitions. Over the years, the company has acquired other software companies like Tableau, Mulesoft, and Slack. Most recently, it considered acquiring Informatica .
The company has also benefited from the ongoing demand for artificial intelligence solutions. It runs Salesforce Artificial Intelligence that let customers use AI to create customisable, predictive, and generative AI in all industries. Some of its customers are the likes of General Mills, Uber, and Schneider Electric.
The next important Salesforce news will be its quarterly results scheduled for Wednesday. Analysts are optimistic that the company will release strong results, helped by digitalisation trends.
The average revenue estimate for the quarter is $9.13 billion while its second-quarter estimate is $9.34 billion. For the year, analysts expect the revenue guidance to be $37 billion. Salesforce has a long record of beating analysts’ estimates.
The most recent results showed that the company’s revenue rose by 11% in the fourth quarter to over $34.9 billion. Its operating margin expanded to 14.4% while its operating cash flow rose by 44% to over $10.2 billion. Salesforce has done well after it came under pressure from several activist investors, forcing it to cut costs.
There are signs that Salesforce is an overvalued company. It has a forward PE multiple of 45, higher than the sector median of 30. The figure is also higher than Microsoft’s 36 and Adobe’s 40.
Salesforce is also overvalued in terms of the rule of 40, a popular approach to value SaaS companies. It has revenue growth of about 10% and a net income margin of 11.8, giving it a total of 22.2. A SaaS company is said to be fairly valued when it has a rule of 40 metric of over 40.
Salesforce stock price forecast
The weekly chart shows that the CRM stock price rose to a record high of $320 earlier this year. It has now paired back some of those gains and moved into a correction. The stock has remained constantly above the 50-week and 100-week Exponential Moving Averages (EMA).
Fortunately, it has also formed what looks like a cup and handle pattern, a popular bullish sign. The current retreat is part of the hand section of the chart. Therefore, while the stock is severely overvalued, the C&H pattern means that it could have a strong bullish breakout in the coming days.
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