Salesforce.com Surges to Record High After Q2 Earnings Blowout

Salesforce, which replaces ExxonMobil on the Dow next week, bumped its full-year revenue forecasts higher as work-from-home dynamics helped the cloud and software group to stronger-than-expected second quarter earnings.
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Salesforce.com Inc.  (CRM) - Get Report shares surged to a fresh all-time high Wednesday after the soon-to-be Dow component blasted Wall Street forecasts for its second quarter earnings and issued a robust outlook for the final months of the year.

Salesforce said adjusted earnings for the quarter were pegged at $1.44 per share, up 118% from the same period last year and well ahead of the Street consensus forecast of 67 cents per share. Group revenues also impressed, rising 29% to $5.15 billion and again beating analysts' forecast of a $4.9 billion tally.

Work-from-home increases, which have driven profits for cloud and software focused rivals, should continue to boost near-term revenues, Salesforce said, which are expected to rise some 20% from last year to $20.8 billion.

"While the demand trends were strong in Q2, we remain mindful on how the pandemic may continue to impact our customers and community,' CFO Mark Hawkins told investors on a conference call late Tuesday. "Therefore, our guidance assumes that the revenue attrition remains consistent with Q2's after performance and assumes we deliver modest new business growth during the second half of fiscal 2021."

"We are taking this quarter-by-quarter as the pandemic is not over and we are only half way through the fiscal year," he added. In that mind, from that perspective we will continue to evolve and re-imagine our business to enhance our relevance and deliver the highest level of customer success and innovation."

"As we look out over the next 12 to 24 months we realized it is important for us to make a strategic shift in investments today to better position our company for continued growth and customer success and this new all digital work from anywhere environment," Hawkins said.

Salesforce shares were marked 26% higher in early trading Wednesday to change hands at $272.00 each, an all-time high that would extend the stock's year-to-date gain to around 67.2%.

Salesforce also gained 3.7% yesterday after S&P Dow Jones said the San Francisco, California-based software group would replace ExxonMobil  (XOM) - Get Report on the Dow Jones Industrial Average next week.

"Salesforce reported excellent F2Q results with records for operating margin, bookings & billings upside, and guidance raise," said Oppenheimer analyst Brian Schwartz, who carries an outperform rating with a $250 price target on the stock. "The business outperformance was driven across new business, licensing, retention, early performance achievements, and favorable currency."

"Guidance is raised near the pre-pandemic targets. Thus, management's prior expectation for no recovery until 2021 was overtly conservative," he added.