Salesforce Q3 preview: Where next for Salesforce stock?
Joshua Warner November 25, 2021 11:03 PM
Salesforce is expected to report another quarter of record revenue, but earnings are set to come under pressure as it faces strong comparatives from last year and because it has splashed out on a number of businesses this year.
When will Salesforce release Q3 earnings?
Salesforce will release third quarter earnings after US markets close on Tuesday November 30.
Salesforce Q3 earnings preview: what to expect from the results
Salesforce is expected to report strong topline growth in the third quarter as large businesses continue to raise spending on the company’s suite of products as industries continue to digitally transform, and thanks to the boost provided by new acquisitions, most notably the completion of the Slack purchase in July, which followed the purchase of Acumen in February. Salesforce’s ability to offer an integrated suite of digital products makes it a favourite, especially with larger businesses wanting to find the fewest solutions to handle the most tasks.
Salesforce has said revenue will be between $6.78 billion to $6.79 billion in the third quarter. Wall Street forecasts revenue will rise to $6.80 billion from $5.42 billion the year before.
Analysts also believe Salesforce could deliver around 20% growth in remaining performance obligation (RPO). Slack is seen delivering growth of 35% to 40% and, when included with the wider business, RPO could rise by over 25%, ahead of the 22% being targeted by the company.
There is a chance that Salesforce could beat expectations in the period considering it raised its full year guidance in September, stating it is aiming to deliver annual revenue of $26.25 billion to $26.35 billion (from $26.2 billion to $26.3 billion beforehand). That would be around 24% higher than last year.
However, profitability is set to come under strain as it comes up against tougher comparatives from last year, when there was a boom in demand as companies adapted to remote working, and because of the costs of its M&A this year. Still, Slack, Acumen and other acquisitions should help accelerate organic sales growth going forward and, in time, help lower the likes of sales and marketing costs as it benefits from sharing functions and scale.
Salesforce has said adjusted EPS will come in between $0.91 to $0.92 in the third quarter, with a reported loss per share to be between $0.05 to $0.06. Analysts are expecting adjusted diluted EPS to fall to $0.92 from $1.74 last year, and have pencilled in a $0.04 reported loss per share compared to the $1.15 profit delivered the year before.
Salesforce shares have rallied over 30% since the start of 2021 and hit an all-time high of $311.68 on November 9, but it has since lost steam and declined over 6%. A number of brokers have recently raised their target price on Salesforce, with Jefferies bumping it up to $360 from $325, Citigroup to $308 from $280, and BofA Global Research to $360 from $330. That is largely in-line with the wider view, with the 51 brokers covering the stock placing a Buy rating and an average target price of $324.95, implying there is over 12% potential upside from the current share price.
Where next for Salesforce stock?
Salesforce had been steadily trending higher from May, forming a series of higher highs and higher lows. The price ran into resistance at $311 all-time high and has since rebounded lower.
The break below the 50 sma, combined with the bearish RSI, is keeping sellers optimistic of further downside to come.
Support can be seen at $277 the rising trendline and a break below there could negate the near-term uptrend. Furthermore, it would expose the 100 sma at $270. A move below here could see sellers gains momentum.
On the flipside, a move above resistance at $298 November 10 low could open the door to $311 and fresh all time highs.
How to trade the Salesforce share price
You can trade Salesforce shares with City Index in just four easy steps:
- Open a City Index account, or log-in if you’re already a customer.
- Search for ‘Salesforce’ in our award-winning platform
- Choose your position and size, and your stop and limit levels
- Place the trade
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.