Salesforce (CRM) presented mixed financials for the third quarter of 2022. The company’s management is confident of generating wide profit margins in a short period of time. However, the company laid off some of its employees in November. Moreover, the stock has lost more than 35% this year. Let’s find out if investors should buy CRM now or wait…
The software company Salesforce, Inc. (CRM) recorded solid top-line year-over-year growth in its most recently reported quarter. Also, the company recently signed an agreement with insurtech leader, Zywave.
The partnership aims to merge insurance agency sales and customer service for efficient, strategic workflows enhanced by data and content to deliver a seamless customer experience.
Amy Weaver, CRM’s president and chief financial officer said, “In this time of economic uncertainty, we remain committed to profitable growth and consistent operating margin expansion.”
However, the company’s bottom line fell year over year in the third quarter of 2022. Also CRM laid off part of its employees in November, citing weakened demand.
CRM has lost marginally over the past month to close the last trading session at $160.25. It has lost 36.9% so far this year and 43.8% in the past year.
Here’s what can shape your CRM’s performance in the short term:
CRM’s total revenue came in at $7.84 billion for the third quarter ended October 31, 2022, up 14.2% year over year. Gross profit came in at $5.75 billion, an increase of 14.5% from the previous year. However, net income came in at $210 million, down 55.1% year-over-year, while EPS came in at $0.21, down 55.3% year-over-year.
Mixed EPS estimates
For the quarter ended October 2022, CRM’s EPS is expected to decline 4.7% year-over-year to $1.21 and marginally year-over-year to $4.73 in 2023.
On the other hand, EPS is expected to increase 59.5% year-over-year to $1.34 for the quarter ending January 2023 and 18.6% year-over-year to $5.61 in 2024.
CRM’s subsequent 12 months EBITDA margin of 8.41% is 29% lower than the industry average of 11.84%, and the trailing 12-month net income margin of 1.83% is 41.9% lower than the industry average of 3.15%.
Additionally, trailing 12-month ROCE, ROTC and ROTA are 0.93%, 0.11% and 0.57%, compared to industry averages of 4.75%, 3.24% and 1.52%, respectively.
POWR ratings reflect an uncertain outlook
CRM has an overall rating of C, which corresponds to a neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 different factors, with each factor weighted optimally.
Our proprietary rating system also evaluates each stock based on eight different categories. CRM has a C grade for growth, consistent with the mixed economy in the last reported quarter. It has a C grade for stability, in sync with its beta of 1.12.
In the 139 warehouse Software – Application industry, CRM is ranked #38. The industry is rated F.
Click here for the additional POWR ratings for CRM (Value, Momentum, Sentiment, Quality).
See all the top stocks in the software – applications industry here.
The bottom line
CRM beat consensus estimates in the last quarter. It beat revenue estimates marginally and EPS estimates by 14.5%. However, the stock has lost 40.8% since hitting its 52-week high of $270.57 on December 10, 2021. Additionally, given its poor profitability, investors could wait for a better entry point into the stock.
How does Salesforce, Inc. (CRM) stack up against its peers?
While CRM has an overall POWR rating of C, one might consider looking at its industry peers, Commvault Systems, Inc. (CVLT), IBEX Limited (IBEX), and eGain Corporation (EGO), which has an overall rating of A (strong buy).
CRM stock was trading at $145.20 a share Thursday afternoon, down $15.05 (-9.39%). So far this year, CRM has fallen -42.86%, against a rise of -13.30% in the benchmark S&P 500 over the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master’s degree in economics, she helps investors make informed investment decisions through her insightful commentary.
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