Insights

Why Salesforce Stock Rallied Nearly 3% Higher Today

What happened
A day after a brutal sell-off for stocks, shares of cloud software-pioneer Salesforce (NYSE: CRM) were up 2.7% as of market close. At one point, shares were over 4% higher, compared to flat performance for the Nasdaq Composite overall and only a 0.2% gain for the S&P 500.  
However, Salesforce stock is still down 44% from all-time highs reached in the autumn of 2021.  

Image source: Getty Images.

So what
There was no specific news from Salesforce that caused today’s jump in price. Chalk up the daily move to a relief rally a day after shares were pummeled in a widespread market sell-off.
Investors are increasingly worried about the Federal Reserve’s aggressive posturing when it comes to raising interest rates, an attempt to try and cool off the economy and bring down inflation rates. Higher interest rates lower the present value of growth stocks. 
Additionally, worry is also persistent about Russia’s war in Ukraine and the resulting humanitarian crisis in Eastern Europe. In its last earnings call, Salesforce had said it does minimal business in Russia and Ukraine, but overall sentiment surrounding the situation is dragging down companies like Salesforce, anyway.
Now what
Salesforce will likely report first-quarter earnings results in late May or early June (a firm date hasn’t been announced yet). During the last update, management said to expect year-over-year revenue growth of about 24%. For the current full fiscal year, Salesforce expects to achieve 21% revenue growth and adjusted operating profit margin of about 20%. 
Now trading for 32 times trailing-12-month free cash flow, Salesforce is beginning to look like a serious value, considering its long-term consistent 20%-plus revenue growth rate.
Nicholas Rossolillo and his clients have positions in Salesforce.com. The Motley Fool has positions in and recommends Salesforce.com. The Motley Fool has a disclosure policy. –

What happened

A day after a brutal sell-off for stocks, shares of cloud software-pioneer Salesforce (NYSE: CRM) were up 2.7% as of market close. At one point, shares were over 4% higher, compared to flat performance for the Nasdaq Composite overall and only a 0.2% gain for the S&P 500.  

However, Salesforce stock is still down 44% from all-time highs reached in the autumn of 2021.  

Image source: Getty Images.

So what

There was no specific news from Salesforce that caused today’s jump in price. Chalk up the daily move to a relief rally a day after shares were pummeled in a widespread market sell-off.

Investors are increasingly worried about the Federal Reserve’s aggressive posturing when it comes to raising interest rates, an attempt to try and cool off the economy and bring down inflation rates. Higher interest rates lower the present value of growth stocks

Additionally, worry is also persistent about Russia’s war in Ukraine and the resulting humanitarian crisis in Eastern Europe. In its last earnings call, Salesforce had said it does minimal business in Russia and Ukraine, but overall sentiment surrounding the situation is dragging down companies like Salesforce, anyway.

Now what

Salesforce will likely report first-quarter earnings results in late May or early June (a firm date hasn’t been announced yet). During the last update, management said to expect year-over-year revenue growth of about 24%. For the current full fiscal year, Salesforce expects to achieve 21% revenue growth and adjusted operating profit margin of about 20%. 

Now trading for 32 times trailing-12-month free cash flow, Salesforce is beginning to look like a serious value, considering its long-term consistent 20%-plus revenue growth rate.

Nicholas Rossolillo and his clients have positions in Salesforce.com. The Motley Fool has positions in and recommends Salesforce.com. The Motley Fool has a disclosure policy.

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