Yahoo Finance Salesforce Slumps Despite Q1 Beats: ETFs in Focus
Salesforce CRM reported better-than-expected financial results for the first quarter of fiscal 2024. The enterprise cloud computing solution provider’s first-quarter fiscal 2024 non-GAAP earnings increased 71.4% to $1.69 per share from 98 cents reported in the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of $1.61.
The quarterly non-GAAP earnings were adversely impacted by a loss of 11 cents per share from mark-to-mark accounting of CRM’s strategic investments at a non-GAAP tax rate of 23.5%. However, the company’s ongoing restructuring initiative, which includes trimming the workforce, benefited first-quarter non-GAAP earnings by 72 cents per share.
Revenue Growth Outperforms Estimates, Though at Slowest Pace Since 2010
Salesforce’s quarterly revenues of $8.25 billion climbed 11% year over year, surpassing the Zacks Consensus Estimate of $8.17 billion. The top line also improved 13% in constant currency. Despite this, the company's revenue growth for the quarter came in at its slowest pace since 2010, per Reuters. This slowdown was partly due to a shortfall in under-contract sales expected in the next 12 months (that is, cRPO, or current revenue performance obligation).
The company has been benefiting from the robust demand environment as customers are undergoing a major digital transformation. Thus, the rapid adoption of its cloud-based solutions resulted in the better-than-anticipated performance in the fiscal first quarter.
What Went Wrong?
Despite the positive earnings, analysts noted that Salesforce's revenue outperformance was below historical trends, resulting in a stock sell-off. Salesforce also missed on under-contract sales expected in the next 12 months (that is, cRPO, or current revenue performance obligation). However, for the upcoming quarter Salesforce expects sales of $8.51B to $8.53B, higher than the $8.49B estimates.
Wall Street's Response to Salesforce's Q1 Results
Goldman Sachs reiterated its Buy rating on CRM shares, citing the results as "strong in light of the challenging macro backdrop." Similarly, Bank of America reaffirmed a Top Pick status on CRM, noting it was "impressed" by the 1% guidance beat for cRPO growth "given the tough macro and disruption from restructuring actions,” per investing.com, quoted on Yahoo.
Salesforce-Heavy ETFs to Tap?
The stock currently has a Zacks Rank #3 (Hold). The stock has an upbeat Growth and Momentum score of A. The stock’s Industry and Sector ranks are also positive. If investors see these indicators as bullish, may invest in Salesforce-heavy ETFs. The basket approach always minimizes the stock-specific risks.
iShares Expanded Tech-Software Sector ETF IGV – 8.64% Exposure to Salesforce
SmartETFs Advertising & Marketing Technology ETF MRAD – 5.53% Exposure
First Trust Dow Jones Internet Index Fund (FDN) – 5.26% Exposure
Monarch Blue Chips Core ETF MBCC – 5.04% Exposure
Fidelity Cloud Computing ETF FCLD – 4.94% Exposure
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Salesforce Inc. (CRM) : Free Stock Analysis Report
First Trust Dow Jones Internet ETF (FDN): ETF Research Reports
iShares Expanded Tech-Software Sector ETF (IGV): ETF Research Reports
SmartETFs Advertising & Marketing Technology ETF (MRAD): ETF Research Reports
Monarch Blue Chips Core ETF (MBCC): ETF Research Reports
Fidelity Cloud Computing ETF (FCLD): ETF Research Reports
