CRM stock falls as earnings outlook slashed amid $10 billion buyback

Salesforce (CRM) cut its revenue outlook for fiscal 2023, citing exchange rates and reduced demand from retail and telecom customers. CRM shares fell on Thursday


Salesforce also reported late Wednesday earnings for the July quarter that fell from a year earlier, but topped Wall Street targets.

The enterprise software maker now puts its 2023 revenue outlook in a range of $30.9 billion to $31 billion, down from previous guidance of $31.7 billion to $31.8 billion.

On an earnings call with analysts, Salesforce management noted “a more measured buying environment in the back half of the July quarter, particularly in North America and Europe,” Cowen analyst Derrick Wood said in a note to clients.

CRM shares fell 4.8% to 171.31 in afternoon trading on the stock market today.

Salesforce stock: $10 billion buyback set

He added: “This includes longer sales cycles, additional approval layers in purchase decisions and deal compression dynamics. This was seen more acutely in the retail/consumer goods, telecom/media verticals, while financial services, technology and energy were more robust.”

In addition, Salesforce said its board has approved a $10 billion buyback of CRM stock. It is the first ever CRM stock buyback program.

Including Slack Technologies, which it acquired in 2021, Salesforce’s second-quarter revenue fell 19.6% to $1.19 per share on an adjusted basis. The San Francisco-based enterprise software maker said revenue rose 22% to $7.72 billion.

A year earlier, Salesforce reported earnings of $1.48 per share, including investment gains, on sales of $6.34 billion.

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Salesforce equities analysts expected Salesforce to report earnings of $1.03 per share on sales of $7.69 billion.

CRM inventory: Guidance missing estimates

The software maker said current remaining performance obligations, known as CRPO orders, rose 15% to $21.5 billion, in line with estimates. CRPO orders are an aggregate of deferred revenue and order reserve.

For the current quarter ending in October, the company forecast earnings per share in a range of $1.20 to $1.21 vs. estimates of $1.28 per share for CRM stock. The software maker also expects revenue of $7.825 billion at the midpoint of its guidance, versus estimates of $8.07 billion. Salesforce projected third quarter CRPO growth of 12% versus estimates of 16% growth.

“Management has taken a blow torch to guidance that lowers CRPO growth to 12% vs. street of 16% and top line growth to 17% vs. 20% previously,” Jefferies analyst Brent Thill said in a report. “We believe this is prudent in an uncertain macro environment.”

Before Wednesday, CRM stock had pulled back about 30% in 2022, as software growth stocks generally struggle.

Salesforce sells software under a subscription model. The software helps companies organize and manage sales operations and customer relations. The company has expanded into marketing, customer service and e-commerce.

Heading into the earnings report, CRM stock had a relative strength rating of 36 out of a possible 99, according to IBD Stock Check-up.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cyber security and cloud computing.


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