Strong Tech Earnings from Salesforce and Pure Storage

Strong Tech Earnings from Salesforce and Pure Storage

Happy Saturday folks.

This earning season just seems to keep dragging on…

This week, however, we actually saw some relatively strong earnings reports being published, with Pure Storage and Salesforce striking bullish tones for the coming months.

Let’s get into it, shall we?

Moving Up ⬆️

Pure Storage (PSTG) +16.4%

Salesforce (CRM) +14.1%

Datadog (DDOG) +12.2%

Veeva Systems (VEEV) +11.9%

Amazon (AMZN) +9.0%

Moving Down ⬇️

Peloton Interactive (PTON) -9.2%

Lemonade (LMND) -5.4%

Zendesk (ZEN) -5.3%

Core & Main (CNM) -4.4%

2U (TWOU) -3.8%

The Winners:

Pure Storage (PSTG) +16.4%

Pure Storage came up trumps this week after the data tech company reported on a strong first quarter.

For the company’s first fiscal quarter of 2023, revenue grew an impressive 50% compared to the same time last year, driven by strong performance in both its domestic and international markets. Digging down into this a little further, Pure Storage revealed that its subscription services business grew 35% in the period — a bright spot for investors considering that this is a recurring source of revenue.

Speaking about the wider environment, CEO Charlie Giancarlo acknowledged that the effects of inflation will be felt by the company for some time, but noted that its influence on IT solutions like the ones that Pure Storage provides will be muted as many companies still have digital transformation cited as a top priority. This is partially the reason why the company’s guidance for the coming year remained strong, forecasting revenue growth of approximately 22%.

Salesforce (CRM) +14.1%

Salesforce was another company that benefited from a strong earnings call this week.

Despite tough economic conditions and geopolitical headwinds, Salesforce remained optimistic on its latest earnings call as management stated that they have yet to see any material impact on the software giant’s sales and reassured analysts that demand for its products remains high.

Revenue for the quarter rose 24% year-over-year on the back of Salesforce’s Service Cloud and Sales Cloud. These tools are used by companies of all shapes and sizes to handle customer service queries and manage new business opportunities. As a SaaS player, Salesforce has incredible revenue reliability as it signs customers to lengthy, multi-year contracts. This helps keep the business stable and allows management to keep a watchful eye on the horizon.

For the quarter, unearned revenue — which is subscription billings in the pipeline but not yet received — came in at $13.64 billion. This was just under analysts’ expectations.

Most exciting for investors, Salesforce raised its profit estimate for the upcoming year. This is thanks to its bolstered operating margin and a push for efficiency on all levels of the business. Consequently, management has stated it will be taking a highly measured approach to hiring over the coming year.

Amazon (AMZN) +9.0%

In a break from earnings news, Amazon stock popped this week for an altogether more trivial reason — its proposed 20-for-1 stock split has been approved.

This stock split is set to take effect this Monday when every existing Amazon shareholder will receive 19 extra shares for each one they currently hold. This will be the company’s first stock split since 1999.

As we saw with Amazon this week, the announcement of a stock split typically gives the share price of the company in question a notable boost. However, it must also be noted that a stock split in no way alters the intrinsic value of a stock — all Amazon has done is split its proverbial pie into smaller segments.

Stock splits were perhaps more relevant in the past, making highly-priced stocks more affordable to retail investors, but with the advent of fractional investing — where investors can buy a portion of a single share based on a dollar amount — the need for stock splits has lessened significantly and they are largely seen as a non-event.

Still, I’m sure Amazon shareholders will take the bump when they can get it!

The Losers:

Looking across our list of losers this week, there were no reasons of note to attribute to their performance.

Peloton, for example, has just fallen so out of favor with the wider market that any news or uncertainty will have an impact on its stock. The same can be said for 2U and even Lemonade, who will suffer particularly from any more plans by the Fed to raise interest rates.

So, even though most major indexes ticked upwards this week and investor mood seems to be brightening (slightly) we can probably still expect pain for some of our most beaten-down stocks for the foreseeable.

JamesJames

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