Technology giant Salesforce (NYSE: CRM) is valued at $164 billion by market cap. Similar to most other growth stocks, Salesforce has underperformed the broader markets significantly in the last year. Since the start of 2022, Salesforce stock is down 35%, and it's currently trading 47% below all-time highs.
However, Salesforce has also crushed the broader indices over the long term and has returned 353% to investors in the last 10 years. Comparatively, the S&P 500 Index has returned 276% to investors since June 2012.
Salesforce is scheduled to report its earnings for Q1 of fiscal 2023 (ended in April) on Tuesday, May 31st at 5:00 pm Eastern Time.
To listen to the call and access the earnings transcript, as well as the shareholder's letter and the company's financial statements for the quarter, all you need to do is go to Salesforce's investor relations page.
The upcoming earnings report and the company's guidance will be a key driver of its share price
this week. Let's see what Wall Street expects from Salesforce in Q1 of fiscal 2023.
Salesforce is the largest company operating in the CRM (customer relationship management) vertical. A recent report from market research firm IDC states that Salesforce accounts for 23.8% of global CRM spending in 2021, which is two percentage points more than the next four players combined.
Over the years, Salesforce has expanded its product offerings via the acquisitions of Slack and Tableau, allowing it to widen its customer base rapidly.
According to data from Yahoo Finance, analysts expect Salesforce to report revenue of $7.38 billion with adjusted earnings per share of $0.94. In the year-ago period, Salesforce reported revenue of $5.96 billion and adjusted earnings of $1.21 per share.
While analysts expect sales to rise by 16.8% year over year, adjusted earnings are forecast to decline by 22.3% year over year in fiscal Q1.
In addition to revenue and earnings, market participants will closely watch metrics such as RPO or remaining performance obligation. The RPO for an entity is generally defined as the total sum of deferred revenue and order backlog. Salesforce ended fiscal 2022 with an RPO of $43.7 billion, an increase of 21% year over year.
Even if Salesforce manages to beat analyst earnings and revenue estimates for Q1, a lot will depend on the company's guidance for the rest of fiscal 2023. Wall Street expects Salesforce revenue to rise by 21% to $32.06 billion, while earnings are expected to fall by 2.7% year over year to $4.65 per share in fiscal 2023.
Any deviance from these figures will likely result in a sell-off in CRM stock, given its valued at 5.1x forward sales and 35.5x forward earnings, which is quite steep.
While Salesforce stock may be considered expensive compared to the overall market, it's cheaper than peers such as ServiceNow and Workday. For example, the forward price to earnings multiple for ServiceNow and Workday stand at 65x and 46.3x respectively.
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