Analyst: buy Salesforce on the post-earnings dip

By: Wajeeh Khan
Wajeeh Khan
Wajeeh is an active follower of world affairs, technology, an avid reader, and loves to play table tennis in… read more.
on Nov 30, 2021
  • Salesforce reports strong Q3 results but weak guidance for the current quarter.
  • RBC Capital Markets' Rishi Jaluria discussed earnings on CNBC's "Closing Bell".
  • The cloud-based software company promoted its COO Bret Taylor to co-CEO. Inc (NYSE: CRM) topped Wall Street estimates for Q3 earnings and revenue on Tuesday, but shares slid 7.0% after-hours on lacklustre guidance for the current quarter.

Rishi Jaluria’s remarks on CNBC’s ‘Closing Bell’

On CNBC’s “Closing Bell”, RBC’s Rishi Jaluria said the price action in extended trading should be seen as a buying opportunity.

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I think it’s bit of an overreaction because all in all, it was a pretty good quarter, maybe slightly light on the outlook. They’re showing margins that are actually flat YoY in spite of layering and Slack, which should be dilutive. So, I do think this pullback might create a buying opportunity.

Q3 results

Salesforce reported $468 million in profit on an annualised sales growth of nearly 27% to $6.86 billion. On an adjusted basis, it earned $1.27 per share versus the year-ago figure of a higher $1.72. According to FactSet, experts had forecast 92 cents of adjusted EPS on $6.8 billion in sales.

Q3 marked the first full quarter for Salesforce after closing its blockbuster acquisition of Slack Technologies Inc. The U.S. firm did not disclose quarterly numbers for Slack, but CFO Amy Weaver said it was a strong quarter for the workplace-communications software.

Future guidance

For the fiscal fourth quarter, Salesforce forecasts 72 cents to 73 cents of adjusted EPS on up to $7.23 billion in sales. In comparison, analysts were calling for adjusted per-share earnings of 82 cents on $7.24 billion in sales.

The raised guidance for the full-year, however, was roughly in line with the consensus.

New co-CEO

Also on Tuesday, the California-based company promoted its COO Bret Taylor to co-CEO after his commendable role in bringing Slack on board. According to Jaluria, the co-CEO structure is a “positive” for the company.

You still have Benioff strategically guiding things, but Brett, we’ve heard is getting more involved hands-on in deals, especially in large enterprise deals. So, I think you know this co-CEO structure is kind of the best of both worlds.

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