On Jul 04, we retained our Neutral recommendation on the cloud
computing and software company,
On May 24, Salesforce posted modest first-quarter 2014 results
with revenues improving on a year-over-year basis and loss per
share increasing compared to the year-ago quarter. The quarter's
adjusted loss per share of 7 cents was greater than the Zacks
Consensus Estimate of 1 cent loss per share.
Salesforce delivered a negative earnings surprise last
quarter, which took the four-quarter average to a negative
244.4%. Currently, Salesforce has a Zacks Rank #3 (Hold).
Why a Neutral Stance?
Revenues moved up by 28.3% year over year, as the company
witnessed continued demand across all geographies and all of its
cloud solutions, supported by a decline in the attrition rate.
The company witnessed an increase in revenues across all its
business segments, with the Subscription and Support revenues
increasing the most. Gross profit expanded 25.7% year over year
to $683.6 million. Gross margin was 76.6%, down 160 basis points
from the year-ago quarter, as cost of sales continues to
However, continuous increase in research activities has
resulted in the increase in R&D expenses. This was one of the
main reasons for the 28.6% year over year increase in operating
expenses to $728.2 million
The company provided a decent second-quarter 2014 guidance and
expects to generate revenues in the range of $931.0 million to
$936.0 million. Moreover, Salesforce expects GAAP net loss per
share to be in the range of 7 cents to 6 cents. Apart from this,
the company also expects non-GAAP earnings per share in the range
of 11 cents to 12 cents.
We believe that the higher number of deal wins as well as the
geographical contributions were encouraging. Also, the company's
diverse cloud offerings and a better spending environment
projected by Gartner are positive. On the other hand, the
continued weakness in Europe, currency headwinds, continued
operating margin contraction and the economic challenges in Japan
are concerns for the company.
Over the last 30 days, the Zacks Consensus Loss Estimate for
fiscal 2014 widened by 1 cent to a loss per share of 8 cents.
Again, for the fiscal year 2015, the earnings per share estimate
droppedby 1 cent to a level of 2 cents.
Other Stocks to Consider
Other stocks in the technology sector that are currently
performing well include
Aspen Tech Inc.
). All these companies carry a Zacks Rank #1 (Strong Buy).
ACI WORLDWIDE (ACIW): Free Stock Analysis
ASPEN TECH INC (AZPN): Free Stock Analysis
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SALESFORCE.COM (CRM): Free Stock Analysis
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