Salesforce.com stock (CRM) dropped over 3% in early after hours trading after releasing their latest quarterly earnings.
Adjusted earnings came in at 33 cents a share versus estimates of 32 cents. Revenue rose to $2.56 billion versus $2.51 billion that was estimated.
Salesforce.com stock is up by more than 20 percent in 2017. Their annual revenue is continuing to grow by more than 20 percent a year and this year they look ready to surpass $10 billion for the first time in their history.
However sifting through the numbers we see that their Service Cloud which is their second largest business is still not meeting established goals for growth in both user numbers and revenue. There is a lot of competition in this area including Microsoft and Oracle which continues to dominate Salesforce.com’s Service Cloud business.
Salesforce.com Fundamentals At Extreme Levels
Even with today’s earnings the company is trading at extremely high levels. Price to earnings is at 478.7 times versus the industry standard of 53.6 times and Oracle’s 22 times price to earnings. As well Salesforce.com’s book value is $10.60, earnings are 19 cents a share and cash flow is at $1.17 a share. Oracle is at $13.02 with cash flow of $2.80 and earnings at $2.21 a share. Overall Salesforce.com is far from cheap.
Even Amazon Stock which is at 241.8 times price to earnings is trading at half of what Salesforce.com price to earnings is at.
Salesforce.com Stock
We will have to see tomorrow and over the next several days how the stock performs but there is little doubt that this company has to generate a significant increase in revenue to justify their current stock price or risk watching a major tumble in its stock price in any major pullback in the markets. Normally when markets begin major corrections, it is high spec stocks that are hammered and Salesforce.com is definitely in the category.
Internal Stock and Option Trades Links
Put Selling Strategies For Members
Covered Calls Strategies For Members
Profit And Income Strategies Index
Stock and Option Strategies For Members
Stock And Option Trades Explained For Members