When it comes to CRM, which is all about relationships, I thought it was all about relationships for Salesforce ( NYSE:CRM ) in the summer of this year. However, the company is experiencing quite a few outflows in the C-suite.
Shares had decreased this summer, trading close to the $175 level significantly, along with the rest of the (technology) market. Salesforce stock received premium valuations for a long time but noticed prices dropping. However, valuations were still very demanding—too demanding for me—based on realistic earnings.
In Brief
Salesforce has grown into a titan in its industry through astute leadership, organic growth, and dealmaking. The company has a strong track record of acquisitions, which includes a larger $15 billion deal for Tableau in 2019. I have long admired the company and Marc Benioff’s leadership, so I was wary of the high truly realistic earnings multiple and the adjusted earnings numbers.
At the time of the Tableau acquisition in the summer of 2019, Salesforce was valued at $125 billion, or eight times its then-reported annual sales of $16 billion. Sales were growing at a rate of about 20%, and GAAP earnings were essentially nonexistent. Shares reached a high of $300 in November 2021 and fell to $175 this summer, the price at which Tableau acquired the company.
Sales for the company reached $26.5 billion in 2021 and are expected to reach $32 billion in 2022. Sales are on track to double from $16 billion in 2019; however, investors have experienced a 25% dilution over the same period, which has constrained the growth in earnings per share. The company was profitable, which is encouraging, but an adjusted earnings figure of $4.78 per share for 2021 was still significantly impacted by stock-based compensation, which trended at almost $3 per share.
The compan...
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