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Should you buy Salesforce stock on post earnings weakness?

on Aug 24, 2022
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  • Salesforce reports market-beating results for its second quarter.
  • Jason Snipe shares his outlook on the Salesforce stock on CNBC.
  • Shares are down roughly 7.0% on lowered full-year guidance.

Salesforce.com Inc (NYSE: CRM) reported market-beating results for its fiscal second quarter on Wednesday. Shares still tanked after the bell on trimmed guidance.

Is Salesforce stock a ‘buy’?

Including the after-hours price action, Salesforce stock is now down roughly 35% year-to-date, which, as per Jason Snipe (Founder of Odyssey Capital Advisors), is a dip worth buying. On CNBC’s “Closing Bell: Overtime”, he said:

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From an enterprise and software perspective, I like that business. I like the fact that even in an inflationary environment, that part of it is deflationary as employers and businesses look to software as replacements in some ways for labour costs.

His outlook is in line with Wall Street that sees a 40% upside in the Salesforce stock on average.

Future guidance and share repurchase

Salesforce lowered its outlook likely on macro headwinds including a strong dollar and a looming recession that could hit IT spend.

It now forecasts $4.71 to $4.73 of adjusted EPS on $31 billion in sales this year. Salesforce also came in shy of estimates for the current quarter, even though “Dreamforce” – its annual conference that contributes rather pompously to revenue is scheduled for September.

Also on Wednesday, the board authorised a stock buyback programme worth up to $10 billion, as per the earnings press release.

Salesforce Q2 earnings snapshot

  • Net income of $68 million was down from last year’s $535 million
  • Per-share earnings tanked from 56 cents to 7 cents only
  • Adjusted EPS printed at $1.19, as per the earnings press release
  • Revenue went up 22% year-over-year to $7.72 billion
  • Consensus was $1.03 of adjusted EPS on $7.69 billion in revenue
  • Subscription and support sales jumped 21%, slightly below estimates
  • Professional services brought in $577 million, beating expectations

Salesforce attributed the year-on-year hit to profit to the cost of revenue that climbed 32% and pushed total operating expenses up to $5.40 billion versus $4.40 billion in the same quarter last year.