Credit: Shutterstock photoSalesforce.com (CRM) is set to report second quarter fiscal 2019 earnings results after the closing bell Wednesday.
The enterprise cloud computing specialist has seen its earnings projections rise since the start of the quarter. It’s likely for this reason that CRM stock, which has risen 11% just in the past thirty days, has returned 50% year to date, crushing the 6.5% rise in the S&P 500 index. But with the stock, which by many accounts is expensive, closing Tuesday near all-time highs at $152.99 there is no margin for error. This means on Wednesday the tech giant must deliver a strong profit beat and issue confident guidance to keep these shares on their uptrend.
For the quarter that ended July, Wall Street expects the San Francisco-based company to earn 47 cents per share on revenue of $3.23 billion. This compares to the year-ago quarter when earnings came to 33 cents per share on revenue of $2.56 billion. For the full year, earnings are projected to rise 72% year over year to $2.32 per share, while revenue of $13.13 billion would mark a 25.3% rise year over year.
Strong revenue and earnings growth projections are commonplace for the enterprise cloud giant, which has topped or matched the Street’s earnings estimates in sixteen straight quarters. But increased competition from the likes of Microsoft (MSFT) and Oracle (ORCL), among others, could take a toll in the next couple of years. The likelihood of more competition and the fact that the company’s stock trades at all-time highs make investors nervous.
To that end, the company’s growth-by-acquisition strategy, particularly its recent deal for MuleSoft valued $6.5 billion, could pay off. Salesforce was criticized for paying a hefty premium in the deal. But MuleSoft, which uses application programming interfaces (APIs) to help companies access or unlock data across legacy and mobile systems, could prove to be a key growth asset that helps Salesforce further distances itself from its competitors.
Elsewhere, analysts will look for signs that the company’s international expansion goals are taking shape. In the first quarter, the company reported a 31% revenue increase in in EMEA (Europe, Middle East and Africa), while reporting an impressive 30% increase in APAC (Asia-Pacific), thanks to increased demand in Japan.
To the extent these international growth trends can continue Salesforce would be well on its way towards reaching its revenue goal of $20 billion by 2022. And combined with a strong profit beat and confident guidance, these shares — despite their high valuation — should continue to rise.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
