Salesforce
CRM
is one of the stocks that investors can currently add to their portfolio to counter the highly volatile market conditions and benefit from its upside potential.
Since early 2022, Wall Street has been witnessing high volatility due to several ongoing economic uncertainties, including skyrocketing crude oil prices, rising inflationary pressure, an outbreak of new COVID-19 variants, and a shift in the Fed’s policy to a tougher-than-expected line. The global energy supply disruption stemming from the Russia-Ukraine conflict since Feb 25 has aggravated the woes.
Such geopolitical disturbances are very likely to continue dampening investor sentiments, which might eventually bring higher volatility to the U.S. stock market. Year to date (“YTD”), the Dow Jones Industrial Average, Nasdaq Composite and S&P 500 have plunged 14.5%, 27.4% and 19.6%, respectively. In such a scenario, growth-rated stocks like Salesforce can bolster one’s portfolio.
Why is Salesforce an Attractive Pick?
Trading Way Below 52-Week High:
CRM stock currently trades lower than its 52-week high, which reflects its potential to go upward. The stock’s closing price of $167.89 on Jul 18 is 46% lower than the 52-week high of $311.75 attained on Nov 9, 2021. Shares of Salesforce have plunged 34% year-to-date compared with the Zacks
Computer-Software
industry’s decline of 26.3%.
Attractive Valuation:
CRM currently trades at an attractive valuation multiple. The stock trades at a one-year forward price-to-earnings multiple of 4.86X compared with its five-year average of 7.14X.
Solid Rank & Growth Score:
Salesforce currently has a Zacks Rank #2 (Buy) and a
Growth Score
of B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities to investors. Thus, the company appears to be a compelling investment proposition at the moment.
Positive Earnings Surprise History:
CRM has an impressive earnings surprise history. The company outpaced estimates in each of the trailing four quarters, the average earnings surprise being 30.3%.
Strong Earnings Growth Potential:
Although CRM’s Zacks Consensus Estimate of $4.76 per share for fiscal 2023 earnings suggests a year-over-year decline of 0.42%, its fiscal 2024 earnings consensus is pegged at $5.81 per share, indicates a 22.2% year-over-year surge. The long-term expected earnings growth rate for the stock stands at 16.8%, which is better than the Zacks Computer – Software industry’s 12.6%.
Robust Fundamental Growth Drivers:
Salesforce has been benefiting from a robust demand environment as customers are undergoing a major digital transformation. The rapid adoption of its cloud-based solutions is driving demand for its products. Salesforce’s sustained focus on introducing more aligned products as per customer needs is driving its top line.
Per the latest Gartner report, spending on public cloud services will grow from $410.9 billion in 2021 to over $494.7 billion by 2022. According to
Grand View Research
estimates, the global CRM software market, valued at $52.4 billion in 2021, is projected to witness a CAGR of 13.3% between 2022 and 2030. With its SaaS-based CRM and social enterprise applications, we think that Salesforce is well-positioned to lead the market.
Acquisitions have been one of the key growth strategies for Salesforce, strengthening its position in the CRM solution-providing space. In 2021, the company acquired Slack in a cash-stock deal worth $27.7 billion. The Slack acquisition is likely to position the company as a leader in the enterprise team collaboration solution space and enable it to better compete with Microsoft’s Teams product.
Additionally, Salesforce’s partnership agreements with the likes of Amazon Web Services (AWS) and Alphabet for the firms’ cloud services have been helping it expand its international operations.
The company’s global strategic alliance with AWS will help it focus on new product integrations that will simplify secure data sharing and synchronizing across AWS and Salesforce services.
Other Stocks to Consider
Some other top-ranked stocks from the broader
Computer and Technology
sector are
Baidu
BIDU
,
Keysight Technologies
KEYS
and
Synopsys
SNPS
. While Baidu sports a Zacks Rank #1, Keysight and Synopsys carry a Zacks Rank of 2. You can see
the complete list of today’s Zacks #1 Rank stocks here
.
The Zacks Consensus Estimate for Baidu’s second-quarter 2022 earnings has been revised 31 cents southward to $1.38 per share over the past 60 days. For 2022, earnings estimates have moved 3 cents north to $8.27 per share in the past 60 days.
Baidu’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 52.9%. Shares of BIDU have slumped 5.9% in YTD.
The Zacks Consensus Estimate for Keysight’s third-quarter fiscal 2022 earnings has been revised 2 cents northward to $1.78 per share over the past 60 days. For 2023, earnings estimates have moved 5 cents north to $7.16 per share in the past 30 days.
Keysight’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 8%. Shares of KEYS have fallen 30.5% in YTD.
The Zacks Consensus Estimate for Synopsys’ third-quarter fiscal 2022 earnings has been revised 39 cents northward to $1.93 per share over the past 60 days. For 2023, earnings estimates have moved 62 cents up to $9.79 per share in the past 60 days.
Synopsys’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 2.7%. Shares of SNPS have declined 14.8% in YTD.
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