Tech analyst says Salesforce stock experiencing a 'relief rally’

Salesforce.com Inc (NYSE: CRM) reported its quarterly financial results on Thursday that beat Wall Street estimates. Shares of the company were about 5% up in after-hours trading as it raised its guidance for the full year.

Commenting on the earnings report, Jefferies tech sector specialist, Jared Weisfeld, said on CNBC’s “Fast Money”:

“What you’re seeing after-hours is more of a relief rally in the context of a very strong quarter. Revenue and CRPO were up 20% – ahead of expectations.”

Salesforce’s quarterly results and full-year guidance

Salesforce reported $5.96 billion (£4.20 billion) of revenue in Q1 and $1.21 of adjusted earnings per share. Both figures jumped significantly on a year over year basis. For the full financial year, the software company now forecasts up to $26 billion of revenue and $3.79 to $3.81 of adjusted EPS – better than analysts’ predictions. Weisfeld said:

“On the conference call, they’re talking about the guidance for CRPO, including about 300 basis points of Slack contribution. I heard Benioff mention margins ten times, which is the key in terms of performance. If you get the margin inflexions, you will see the price fall through from a multiple perspective.”

The analyst also highlighted the firm’s strong cash flow and expressed confidence in CEO Marc Benioff’s long-term vision for Salesforce. In February, the San Francisco-based company said its full-year revenue topped $20 billion for the first time.

Could Europe serve as a tailwind for Salesforce?

Salesforce generated 70% of its quarterly revenue from the United States, 20% from Europe, and 10% from Asia. Commenting on whether CEO Benioff is focused on the U.S. or on Europe and Asia, Weisfeld added:

“U.S. software companies are over-index to the states for the most part. But Salesforce is a unique company with such a global presence and untapped opportunities that he is looking to go after. You look at all the economies that are locked down that are hopefully going to start reopening in the next six months, with Europe at a 20% plus revenue, which should absolutely serve as a tailwind for Salesforce in the back half of the year.”

Salesforce’s global Dreamforce event, the Jefferies’ specialist added, could also serve as a catalyst in the upcoming months.

Salesforce opened about 7% up in the stock market on Friday. The $220 billion company is now trading at $239 per share versus a year-to-date low of $206 per share in late March.