Actions of Salesforce.com (NYSE: CRM) have exploded higher recently. Shares of the software-as-a-service juggernaut have risen 28% year-to-date and 10% in the last five trading days alone, bringing tech stock to an all-time high.
The soaring action can be explained in large part by the impressive financial results of the specialist in customer relationship management software. Salesforce’s fiscal second quarter earnings report at the end of August and a decision by Salesforce management on Thursday to increase its revenue guidance for FY2022 and open up a bullish outlook for FY2023 revenue make salivate investors.
Here’s a closer look at some of the key metrics that got investors so excited about the stock.
1. Strong double-digit revenue growth
Salesforce’s business continues to grow rapidly, despite its enormous size. Revenue for the fiscal second quarter increased 23% year-over-year to $ 6.34 billion. At the time of the earnings report, management said they expected fiscal 2022 revenue to be between $ 26.2 billion and $ 26.3 billion, a growth of 23 to 24 percent. . But now Salesforce is aiming for an even higher range (more details in the next point).
2. The annual turnover is expected to exceed $ 30 billion next year.
In a business update Thursday, Salesforce lifted its FY2022 revenue opinion, guiding $ 26.5 billion to $ 26.35 billion in revenue for the period.
While the forecast was only a slight improvement over managing the previously provided revenue forecast range, there was another more exciting number in the business update: the first look at the company’s forecast. for FY2023. Management said it expects FY2023 revenue to be between $ 31.65 billion and $ 31.80 billion. This means that management is targeting more than 20% revenue growth again next year. Since Salesforce’s initial revenue forecast for any given fiscal year almost always turns out to be very conservative, this is a bullish appreciation for the company’s initial revenue forecast for fiscal 2023.
3. Improve profitability
Management also indicated last week that it expects a significant improvement in its non-GAAP (adjusted) operating margin. Salesforce Said It Expects 20% Non-GAAP Operating Margin in Fiscal 2023, Up from Management’s Current Estimate for Non-GAAP Operating Margin by 18.5% for fiscal year 2022.
The expected improvement is even more substantial on a GAAP basis. Salesforce said it expects a GAAP operating margin for fiscal 2023 of 3% to 3.5%, up from management’s forecast of 1.8% for fiscal 2022.
4. More than 30% benefits?
Another main reason investors are likely excited about Salesforce stocks is the flow of analyst upgrades for stocks. Following the recent increase in the company’s forecast, one analyst notably gave stocks an impressive 12-month price target of $ 375, down from a previous target of $ 325.
Reiterating an outperformance rating for equities, the Evercore The ISI analyst said the Salesforce analyst day last week was “optimistic.” He praised management’s perspective on expanding its operating margin and noted that the strong financial potential of the company makes stocks look attractively valued today.
While this Evercore analyst is one of the more bullish analysts covering the stock, he’s not the only one who wanted to raise his price target for the stock last week. More than a dozen analysts raised their stock price targets after Salesforce’s Analyst Day presentation on Thursday.
Of course, investors need to do their due diligence instead of relying on an analyst’s opinion to decide whether a stock is attractive or not. But Salesforce’s revenue momentum and management’s expectations for continued growth and margin expansion are certainly impressive, explaining why investors bought stocks.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.