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Salesforce Crushes Earnings -- Is the Stock Still a Buy?

By Eric Cuka – Aug 27, 2021 at 10:00AM

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Salesforce has been the No. 1 CRM software provider worldwide for eight straight years, but is CRM stock a buy now?

Salesforce (CRM 0.73%) was founded in 1999. Since its IPO in 2004, the stock has returned over 6,500% for investors. Its stock has been under pressure over the past year, primarily due to its acquisition of Slack Technologies for a whopping $27.7 billion. Many investors feared that this hefty price tag was unmerited. However, Salesforce management has proven itself time and time again with its acquisition history, and investors are starting to understand the power of Slack as it's integrated into the business. 

The company announced earnings Wednesday night, Aug. 25, after the closing bell. Salesforce showed impressive performance across the board, and it raised FY22 guidance to a range of $26.2 billion to $26.3 billion. Below are some of the highlights from the press release:

  • "Second quarter revenue of $6.34 billion, up 23% year-over-year, 21% in constant currency"
  • "Current remaining performance obligation of approximately $18.7 billion, up 23% year-over-year, 23% in constant currency"
  • "Second quarter operating cash flow of $0.39 billion, down 10% year-over-year"
  • "Second quarter GAAP operating margin of 5.2% and non-GAAP operating margin of 20.4%"
  • "Raises FY22 GAAP operating margin guidance to approximately 1.8% and non-GAAP operating margin guidance to approximately 18.5%"
  • "Initiates third quarter FY22 revenue guidance of $6.78 billion to $6.79 billion, up approximately 25% year-over-year"

Other business highlights from the earnings presentation include:

  • "Salesforce is the #1 CRM software provider worldwide by revenue for 8 consecutive years"
  • "Consistently delivering durable revenue growth, more than doubling from $10.5 billion in FY18 to $21.3 billion in FY21" 
  • "Fastest growing top five enterprise software company with $21.3 billion in revenue in FY21 (~24% Y/Y)"
  • "Uniquely positioned to help our customers drive broad-based digital transformation"

Marc Benioff, chair and CEO of Salesforce, said:

With companies and governments around the world continuing to accelerate their digital transformations, we delivered our fifth phenomenal quarter in a row. Salesforce has never seen better execution or greater momentum. Our Customer 360 platform is now fueled by a herd of unicorns perfectly designed for this all-digital world. Sales, Service, Marketing & Commerce, Platform, Tableau, MuleSoft and now Slack are all billion dollar-plus products delivering customer success like no other company.

Salesforce announced the completion of its acquisition of Slack in late July. The recent earnings report shows the power of how Slack truly unlocks the potential of its Salesforce Customer 360 platform. The full software-as-a-service (SaaS) suite now offers:

  • Sales
  • Service
  • Marketing
  • Commerce
  • Analytics (from the Tableau acqusition)
  • Integration
  • Platfom
  • Industries
  • Learning
  • Sustainability
  • Partners
  • Success

In today's video, I discuss Salesforce in more detail, explain how Slack unlocks tremendous growth potential, break down the business and its recent earnings, and provide stock chart technical analysis on CRM. Please watch for detailed due diligence and analysis on the stock and my opinions on where I think the share price is headed from here.

*Stock prices used in the below video were from premarket of the trading day of Aug. 26, 2021. The video was published on Aug. 26, 2021.

Eric Cuka owns shares of The Motley Fool owns shares of and recommends The Motley Fool has a disclosure policyEric is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.

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