Salesforce.com, Inc. (NYSE: CRM) disappointed the market this week, reporting a second-quarter earnings beat but issuing third-quarter guidance that fell short of expectations. Analysts say long-term investors shouldn’t be worried about the guidance miss, and any near-term earnings weakness in CRM stock is a buying opportunity.
Salesforce on Wednesday reported adjusted second-quarter earnings per share of 53 cents on revenue of $3.28 billion. Both numbers topped consensus analyst estimates of 47 cents and $3.23 billion, respectively. Revenue was up 27 percent from a year ago.
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Sales Cloud revenue, which represents Salesforce’s largest product category revenue source, was up 12.7 percent to $1 billion.
Despite Salesforce’s $6.5 billion acquisition of MuleSoft, margins expanded by 1.7 percent in the second quarter.
Unearned revenue was $5.88 billion, up 24 percent. Remaining performance obligation, a measure of future revenues that are under contract but have not yet been recognized, was about $21 billion as of the end of the quarter, up 36 percent from a year ago.
“Salesforce revenue grew 27 percent to almost $3.3 billion in the second quarter, with excellent performance across our clouds, industry segments and geographies,” co-CEO Keith Block says in a statement. “With this strong quarter, we’re well on our way to our next milestone of $23 billion in revenue in 2022.”
Looking ahead, Salesforce guided for third-quarter revenue of between $3.355 billion and $3.365 billion, above consensus estimates of $3.35 billion. However, third-quarter EPS guidance of between 49 cents and 50 cents was below consensus expectations of 54 cents.
Salesforce also raised its full-year revenue guidance for the third consecutive quarter from a previous range of between $13.08 billion and $13.13 billion to a new range of between $13.125 billion and $13.175 billion. Despite the third-quarter earnings guidance miss, Salesforce also raised full-year adjusted EPS guidance from a previous range of between $2.29 and $2.31 to a new range of between $2.50 and $2.52.
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Morgan Stanley analyst Keith Weiss says CRM stock remains an attractive opportunity for long-term investors.
“With the catalyst of Dreamforce coming up in September and heading into the seasonally stronger second half of their fiscal year, we would be buying any weakness in the shares due to short-term investor disappointment,” Weiss says.
Morgan Stanley has an “overweight” rating and $178 price target for CRM stock.
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Salesforce.com, inc. (CRM) Guidance Disappoints Wall Street originally appeared on usnews.com
