Salesforce,com Inc. (CRM) is encouraging confidence in its cloud king status following a strong earnings beat on the top and bottom lines for its fiscal first quarter.
Shares of the San Francisco-based enterprise software company were up 4% before Wednesday's opening bell, bouncing back from a sizable drop during the month of May.
"I am thrilled with our results this quarter, and I am especially excited to have delivered record revenue in Q1 and operating cash flow of almost $2 billion, up 34% year-over-year," Co-CEO Marc Benioff said in a statement. "We have a massive opportunity in front of us and are well-positioned for long-term growth as the world's #1 CRM."
Billings, a key metric for a company such as Salesforce, were noted to be significantly better than feared after a rough May encouraged caution among analysts. The figure grew nearly 25% year over year to $2.76 billion, cruising past expectations of $2.21 billion.
In addition, Salesforce's pipeline remains strong due to solid engagement among increasingly technology-focused executives, allowing it to sustain the market share gains that have made it such a dominant player.
Besides posting the quarterly beat, Salesforce raised its full-year EPS estimate to a range of $2.88 to $2.90 from earlier guidance of $2.54 to $2.56, while revenue is expected to be between $16.10 billion and $16.25 billion. The expectations come in well above the Wall Street consensus on both metrics.
"Salesforce.com stands out from almost any pack as the pioneering trailblazer of the cloud computing movement, and it has blossomed into a true multi-product success story as it now rides atop multiple product pillars of substantial scale and trajectory," J.P. Morgan analyst Mark Murphy wrote in a note to clients. "The high level of ecosystem buy-in suggests that the company's LT guidance calling for $26-28 billion in revenue by FY23 is achievable."
Murphy suggested that Salesforce deserves an even higher multiple based on its growth trajectory than it already carries in the high-multiple cloud sector. Murphy said Salesforce's history of success should garner it a premium to its peer group.
The only question is how the market will accept the report, especially as Benioff calls for regulation of big tech, potentially inviting a crackdown on the industry and his company as a result.
Fears of an economic slowdown also have spooked many cloud investors as broad-based corporate cost cutting would flow through to software providers such as Salesforce.
Jim Cramer's Action Alerts PLUS team hopes the strong quarter and consistent growth of the business at Salesforce, which is a holding of the Action Alerts PLUS charitable trust, can help quell those concerns about the business.
"Overall, it looks like a pretty clean quarter for Salesforce.com, and it comes at a pivotal moment in time as fears of a global economic slowdown have weighed on the market," the team said. "After a tough period of dormancy and shares steadily trading lower, we view now as a good time to buy."
