To The Moon

$Salesforce.com(CRM)$ is scheduled to report their quarterly results for the period ending 31 July 2024 on 28 August 2024 after the market close. It is expected to show a rise in quarterly revenue.

But challenges from economic uncertainties and geopolitical tensions have companies reduce their IT spending, this would have an impact on Salesforce sales.

Salesforce is expected to report a 7.3% increase in revenue to $9.234 billion from $8.6 billion a year ago. Based on the guidance given by Salesforce on 06 August 2024 for the period ending 31 July, it is expecting for revenue to come in between $9.20 billion and $9.25 billion. (SAL is based on Total Revenue).

The consensus EPS forecast is expected to be at $2.35 per share. This is within the EPS guidance given by Salesforce on 29 May 2024 for period ending 31 July which was between $2.34 and $2.36

Slowdown in Sales Due to Customer Behavior Shift

If we looked at Salesforce subscription and support revenue, it has been on a consistent growth, and we could be expecting some slowdown coming first quarter of fiscal 2025, this is not only with Salesforce, but with the broader market as more and more incumbent come in for SaaS providers.

Salesforce is now grappling with a noticeable slowdown. In the first quarter of fiscal 2025, the company barely managed to scrape into low double-digit growth territory, a far cry from the 20% plus growth that it had regularly posted up until fiscal 2022.

The root of this slowdown lies in a combination of factors. Economic uncertainties and geopolitical tensions are making businesses more cautious about their IT spending. Companies are tightening their budgets, delaying large-scale investments and scrutinizing deals more closely. Salesforce has acknowledged that its customers are now taking longer to close deals and opting for smaller, less ambitious projects.

This is going to hurt Salesforce professional services and other revenue as we can see that from 2023 to 2024, there is sign of slight decline. This shift in customer behavior is particularly damaging to Salesforce’s revenue growth. The company’s Professional Services division is also seeing a decline in demand for multi-year transformation deals. In some cases, projects are being delayed or scaled back, further impacting revenue growth.

Salesforce (CRM) Price Target Forecast

Based on 39 Wall Street analysts offering 12 month price targets for Salesforce in the last 3 months. The average price target is $296.74 with a high forecast of $352.00 and a low forecast of $230.00. The average price target represents a 11.86% change from the last price of $265.28.

I would not be expecting Salesforce to go towards the higher end of the price target forecast, but we might see Salesforce tracking downside to be near $245 if their earnings did come in less-than-expected.

Salesforce (CRM) Year-To-Date Returns

Salesforce investors have been having 1% returns on the stock price, considering that CRM is one of the leaders in the SaaS industry and also they are one of the pioneers to be using and deploying AI in their software.

So why CRM is not performing? One of the reasons I see is that there have been more innovative software which can do better than CRM. From what I have observed in my field of business, I can see that companies are looking for a more comprehensive customer management software with faster and more effective deployment.

Over the last few years, we have seen many new customer management software provider, and $Microsoft(MSFT)$ have been enhancing their side with the Microsoft Dynamics 365 Sales

So I will be looking at how Salesforce revenue from their professional services is playing out in the upcoming earnings.

Salesforce (CRM) Technical (MACD and KDJ)

If we looked at the technical, CRM is trading sideway prior to its earnings, if we looked at 29 May 2024, CRM have a huge decline on its earnings, likewise, it was trading sideway before its earnings.

MACD though is showing upside movement, but it is converging into a bearish crossover and KDJ is indecisive so I will be observing the price action today (27 Aug) on how CRM investors are thinking or expecting.

Summary

Salesforce slowdown in sales is expected as companies are holding back some of the projects that is not business critical, one of them is customer management, because there are many ways and software that can do the same.

What CRM need to do is to make their software more attractive and easier to implement, like starting some and keep adding. One of its competitors I can think of is $Monday.com Ltd.(MNDY)$ , they have achieved the financial milestone of 1 billion a decade after it launched its Work Operating System and eight years since it reached $1 million in ARR. 

On top of that, Monday.com offer project management with customer management. This show that customers are looking for alternatives on the customer management software.

Appreciate if you could share your thoughts in the comment section whether you think CRM would be able to show improvement in their professional service revenue as well as maintaining their subscription revenue.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.