Those who follow salesforce.com (NYSE: CRM) stock may recall investors’ reaction following its fiscal 2017 second-quarter results, which disappointed in a couple of ways: Its results were below the Street’s expectations, and its guidance fell short for the third quarter, results for which were recently released. At the time, those factors led to a nearly 4.5% drop in share price that has persisted — until now.
A quarter ago, Salesforce forecast revenue in the $2.12 billion range, along with earnings per share after one-time costs of $0.20 to $0.21. Not only did Salesforce fly past its own forecasts — which can sometimes be a bit muted intentionally to help ensure an earnings “beat” — it surpassed analysts’ consensus estimates as well.
Salesforce ended its Q3 with a 25% jump in revenue to $2.14 billion and EPS after expenses of $0.24, above analyst sales expectations of $2.12 billion and $0.21 a share in earnings. The icing on the cake was that it raised its guidance for the fiscal year to $8.37 billion. After a 4% jump in stock price in early Friday trading, patient shareholders have seen most of the losses they took since that disappointing Q2 report came out erased.
Fueling Salesforce’s growth, at least in part, is CEO Marc Benioff’s recent acquisition spree, which includes a $700 million deal for data management developer Krux, e-commerce provider Demandware for $2.8 billion, and word processing specialist Quip for $750 million, all within the last few months.
There’s risk involved with Benioff’s growth by acquisition strategy, of course, but a couple more solid quarters should put the concerns about it to rest.
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Tim Brugger has no position in any stocks mentioned.
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