This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Salesforce.com Is a Buy Ahead of Earnings

NEW YORK (TheStreet) -- With better-than-expected results coming out from Cisco (CSCO - Get Report) and Rackspace (RAX - Get Report), it seems corporate executives are feeling much better about the state of their businesses. They've developed enough confidence to spend more money.

Although Salesforce.com (CRM) has come under scrutiny for investing in growth rather than focusing on profits, management deserves credit for having placed the right bets on customer relationship management business, or CRM (for which their stock is named).

The stock, on the other hand, has been tough to gauge, particularly for value investors. Still, it's tough to bet against the cloud and enterprise giant, which will report first-quarter earnings results Tuesday.

The Street will be looking for earnings of 10 cents per share, which will be flat year over year. The company is expected to post full-year earnings per share of 50 cents, up 42% year over year. Analysts are unsure of what to expect, however, given management's questionable track record on expenses.

In the most recent quarter, operating results were impacted by higher costs. And this goes back to the reputation Salesforce has established as a "grow at all cost" operator.

But here's the thing: Salesforce has always delivered the growth that the Street has come to expect.

For instance, despite the wider-than-expected fourth-quarter loss, the company demolished its revenue targets. This time, revenue is expected to be $1.21 billion for the quarter, 36% higher than the year-earlier total of $892.6 million. For the year, revenue is projected to come in at $5.29 billion.

The optimism about Cisco's results, which beat both top and bottom lines, suggest that business conditions in the U.S. and across the globe are improving. To that end, I expect Salesforce, which is the cloud leader in customer relationship platforms, to secure the type of deals that were not possible at the beginning of the year.

Salesforce's ability to differentiate from, say, IBM (IBM) and Workday (WDAY), gives it the sort of advantage that customers appreciate -- especially those looking for capabilities in digital cloud marketing. And when you factor in that Salesforce has posted revenue growth in the last two quarters, including a 28% year-over-year jump in the January quarter, it becomes a question of "by how much will it beat," not "will it beat?"

With its expertise in cloud management of various business functions like sales, marketing and big data analysis, Salesforce figured out how to service these needs at a fraction of the cost. The company's subscription platform has become the new standard, replacing the traditional contracts and bundled licenses from the likes of IBM and SAP (SAP). And Salesforce's growth, according to research firm Gartner, has only just begun.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
CSCO $29.30 0.00%
RAX $51.35 0.00%
AAPL $126.41 0.00%
FB $81.21 0.00%
GOOG $575.33 0.00%

Markets

DOW 18,135.72 +38.82 0.21%
S&P 500 2,101.04 +2.51 0.12%
NASDAQ 4,982.8090 +15.6680 0.32%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs