Friday, August 20, 2010 (CRM) Beats Estimates By Enough; Raises Yearly Guidance

Based on its astronomical valuation I would have thought that beating estimates by only 2 cents would not have been enough to keep the party going at (CRM) but perhaps the raised guidance did the trick; although I find the increase very modest. (full report here)  Despite a good jump in earnings, earnings were flat year over year as expenses surged.

The stock is up 8% this morning; so for now the water is safe in terms of earnings for 89 more days, until we repeat the circus.  I will try to get back some of what I sold yesterday in the future weeks.

Via Reuters:

  • Inc (CRM) on Thursday posted a better-than-expected quarterly profit and raised its full-year outlook as more clients signed up for cloud-based computing services.   The company raised its full fiscal year revenue forecast to a range of about $1.595 billion to about $1.6 billion. It raised its non-GAAP earnings per share forecast to a range of about $1.15 to $1.17 from $1.13 to $1.15.  (doesn't seem like a lot, not sure what the excitement is about)
  • It forecast fiscal third quarter earnings of 30 cents a share to 31 cents a share on revenue of between $408 million to $410 million.  Analysts on average had been forecasting third quarter earnings of 29 cents on revenue of $393.8 million.
  • Salesforce's fiscal second quarter earnings, excluding items, were flat year-over-year at 29 cents per share for its fiscal second quarter ended July 31 as second-quarter revenue rose 25 percent to $394 million.  Analysts had on average expected profit of 27 cents on revenue of $384.8
  • Operating expenses rose 28 percent to $286.9 million while cost of revenue rose 24 percent to $77.8 million.
  • Chief Executive Marc Benioff said on a conference call he is "very bullish" about true cloud computing increasing efficiency at low levels of costs for client companies. Benioff said his company was benefiting from a shift by some companies away from major capital investments in technology hardware to using technology services provided by companies like Salesforce.  "All of our clouds are growing, and it's tough to be a cloud at Salesforce because all of them are just moving so fast."
  • Wall Street analysts were positive about the way the company had performed in an uncertain economic environment despite recent cautious commentary by some technology chief executives on quarterly conference calls.  "This was a really strong performance across the board. It was a great quarter that's hard to pick at," said Sasa Zorovic, analyst at Janney Montgomery Scott.  "What's really showing here is that corporate America and companies across the world are moving to this compelling proposition of cloud computing," he said.
  • Some investors have been cautious about Salesforce stock because it is among one of the more expensive technology stocks, trading at roughly 85 times the average analyst forecast for next year's earnings.
  • "A lot of people have been thinking the stock is expensive and needs to grow into its high multiples it has but they won't have to wait too long because the cash flow was not only strong in the first half but is now expected to be strong for the rest of the rest of the year," said Nemeroff.
Long in fund; no personal position


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