Salesforce on Track to Achieve $10bn Revenue in FY18

Salesforce on Track to Achieve $10bn Revenue in FY18

 
Last week, the stock of software and cloud computing company Salesforce Inc (NYSE: CRM) recorded a new 12-month high of $95.23. Apart from beating analysts’ estimates, the company also reported a 26% increase in the fiscal 2018 second-quarter revenue, compared with the similar period last year. Additionally, on the basis of exceptional growth in deferred revenue and upbeat FY18 guidance, we anticipate the stock to remain bullish in the week ahead.

The San Francisco, California-based company reported 2Q18 GAAP net income of $17.74 million, or $0.02 per share, on revenues of $2.56 billion. That compares to a GAAP net income of $229.62 million, or $0.33 per share, on revenues of $2.04 billion in the corresponding period of fiscal 2017.

Excluding amortisation of purchased intangibles, stock-based expenses, and income tax adjustments, among others, Q2 2018 non-GAAP net income increased to $240.90 million, or $0.33 per share, from $170.43 million, or $0.24 per share, in Q2 2017. The Street analysts’ had anticipated earnings of $0.32 per share on revenues of $2.51 billion. It is the 10th straight quarter the company had beaten the Wall Street expectations.

Salesforce’ 2Q18 deferred revenue, a measure of future growth, increased 26% y-o-y to $4.82 billion and crushed analysts’ expectations of $2.17 billion. Likewise, unbilled deferred revenue, which indicates the portion of contracts that are yet to be billed and are not part of the balance sheet, also jumped 30% y-o-y to $10.40 billion.

Salesforce, which has acquired only one company in 2017, is focusing on generating growth, particularly in the field of artificial intelligence. Notably the company has made a record number of acquisitions in 2016.
For the third-quarter, Salesforce anticipates revenue in the range of $2.64 billion to $2.65 billion, which is higher than analysts’ estimates of $2.61 billion.

The company raised its prior FY18 revenue outlook by $100 million to a range of $10.35 billion to $10.40 billion. The Wall Street analysts are expecting $10.29 billion for the full-year 2018.If Salesforce achieves that guidance, then it would be the first time the company would be crossing $10 billion revenue in a fiscal year. Additionally, it would be the shortest time period in which an enterprise software company has ever crossed such a landmark revenue.

Salesforce also upwardly revised its fiscal 2018 non-GAAP earnings. The company now expects adjusted earnings to be in the range of $1.29 to $1.31 per share. Analysts are forecasting earnings of $1.30 per share. At the end of 2Q18, Salesforce had cash and cash equivalents valued at $1.95 billion, up from $1.61 billion last year.

As the price chart indicates, the stock has broken above the upper band of the Keltner channel. That indicates the prevailing bullishness in the stock. The argument is also confirmed by the crossover of the short-term momentum above the long-term momentum. Thus, it can be understood that the uptrend is intact.

Saleforce - Technical Analysis - 31st August 2017

To gain from the analysis, we may buy a call option active for a period of one week. A strike price of about $93 is ideal for the binary option trade.

Disclaimer: The trading analysis offered here is our opinion. It is not provided as trading advice, merely an indication of our trading plan. We cannot guarantee success and we encourage traders to incorporate a strong money management strategy to limit losses. Please use this article as part of your own research before formulating strategies prior to trading.


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