Is Salesforce a buy after its big run?

Software and big technology names have been flying throughout 2020. Here is an update on $CRM, otherwise known as Salesforce.


Current Price: $259.56

52/Wk High: $284.50

52/Wk Low: $115.29


Read below for the breakdown!


Salesforce ($CRM) is a major player in the cloud software world and more specifically workplace (Enterprise) software. 


When breaking down the company and stock, the stock price can be broken down by segment.


According to TREFIS (@trefis) 57.0% of $CRM is based on the companies Cloud-Based Software segment. Furthermore, another 38.5% is based on Cloud Software and 0.7% is based on Consulting & Services. Finally, only 3.8% of the stock price is based on cash and net of debt.


Since the stellar Q2 report Salesforce stock has exploded to the upside. Digging into those Q2 numbers, you couldn’t ask for much more. 


Salesforce reported a Q2 earnings beat for the fiscal year 2021 with an EPS of $1.44, beating the analyst’s consensus estimate of $0.67. Not only that, but revenue also came in significantly higher for Q2, landing at a solid $5.15 billion, up 29% year-over-year.


When it comes to guidance, management is expecting Q3 2021 revenues of $5.24 billion to $5.25 billion representing growth of 16% year-over-year.


Exploring the balance sheet as of Q2 Salesforce maintained a Total Debt level of $2.673 billion. Furthermore, Salesforce reported a Total Liabilities level of $19.340 billion and a Total Assets level of $57.780 billion.


Finally, during the Q2 report Total Cash and Short Term Investments came in at $9.283 billion, down from the previous quarter when Total Cash and Short Term Investments were $9.802 billion. 


When it comes to the pricing of $CRM the stock is very expensive compared to earnings. When last reported Salesforce traded at a price to earnings ratio of 671.22 times and a price to sales ratio of 12.29 times.


Not only that but Salesforce currently trades at a price to book multiple of 6.18 times and a price to cash flow ratio of 46.63 times. It is also important to note that Salesforce currently trades at a market cap of $234.5 billion.


Given the solid numbers all around, the analysts remain bullish on Salesforce. Currently, the mean price target is $273.65/share, representing a 6.18% gain. 


Secondly, the high price target is $325.00/share, representing a 26.11% upside, and the low price target is $160.00/share, representing a -37.92% downside.


The big money is just as bullish as the analysts. Currently, 82.08% of the Salesforce is owned by institutions. Top holders include Fidelity Management & Research, The Vanguard Group, and T. Rowe Price Associates.


When it comes to the charts, Salesforce has pulled off its recent highs and could be at a relatively solid level to open a position. Taking a look at the six-month charts, the MACD is running sideways after a big retreat, with a range around 6.


Furthermore, the six-month RSI sits at 57 and CCI sits at 64 both of which are neither good nor bad at their current levels.


Overall I am a fan of Salesforce. Given the company’s solid growth and future guidance as well as digital technology trends, Salesforce in my opinion is an excellent long-term play.


EAT - SLEEP - PROFIT 


Disclaimer: This is not direct financial advice, simply an opinion based on independent research.