Salesforce’s FQ2’23 Earnings Release Spooks Market

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Salesforce’s FQ2’23 earnings release spooked the market, as CRM gave up all its August gains as it closed in on its mid-July lows. However, we noted nothing significantly amiss in its earnings card, as we posited in our pre-earnings update that much of its near-term challenges had been reflected. Therefore, we view the recent deep pullback as an opportunity for the market to shake out some weak holders and allow another fantastic opportunity for patient investors to add more exposure. Consequently, we are confident that the company’s robust profitability profile remains intact, as management maintained its non-GAAP operating profit margins guidance. We think that this event will have little effect on SALESFORCE.COM($NYSE:CRM)’s market and earnings in the long term. The company has a strong track record of delivering on its promises, and we believe that management will continue to execute well going forward. Therefore, we view the recent sell-off as an opportunity to buy shares of a high-quality company at a discount.

Stock Price

On Monday, SALESFORCE.COM stock opened at $164.3 and closed at $160.2. This was a result of the company’s earnings release, which spooked investors. The release showed that Salesforce is expecting a slower growth rate in the second half of the year. This news caused the stock to drop, as investors are worried about the company’s future growth.

VI Analysis

Salesforce.com is a cloud-based customer relationship management software company. The company’s fundamentals reflect its long term potential, and the VI app makes it easy to analyze these fundamentals. The VI Star Chart shows that Salesforce.com is classified as a ‘gorilla’, a type of company that has achieved stable and high revenue or earnings growth due to its strong competitive advantage. High growth companies are generally seen as more risky because they attempt to grow faster. However, Salesforce.com is strong in growth and profitability, and medium in asset size, which makes it a less risky high growth company. The company’s health score of 6/10 with regard to its cashflows and debt indicates that it is likely to sustain future operations in times of crisis.

Summary

There are a few key reasons why investors may be spooked by the results. First, Salesforce’s billings growth came in below expectations. Second, Salesforce’s guidance for the full fiscal year was also below expectations. Overall, there are a few reasons why investors may be spooked by Salesforce’s earnings release. However, it’s important to remember that the company is still growing at a very rapid pace and is one of the leaders in the cloud software space.