Salesforce.com Inc CRM is set to report its third quarter financial results for the fiscal 2020 after the closing bell on Tuesday, December 3. There are solid fundamental indicators but its stock has struggled to keep up with the market.
Its shares did go upward 18% this year but on the other side, they lagged behind the software industry which exhibited a 41% increase. But it seems that Salesforce has more than a few value-adding surprises up its sleeve which is why it expects to double its revenues by 2024.
Dreamforce Investor Day 2019
At this year's conference, Salesforce CEO Marc Benioff stood in front of a screen that displayed major tech industry players around Salesforce: Microsoft Inc MSFT, Apple Inc AAPL, Amazon.com, Inc.'s AWS AMZN, Alphabet Inc GOOG, International Business Machines Corporation IBM, Hewlett Packard Enterprises Company HPE, Cisco Systems Inc CSCO, Dell DELL and Alibaba Group Limited BABA.
Benioff explained that Salesforce goal not to create boundaries but to work in a community as it partnered with all the major companies. And Salesforce is showing it can be unifying centre between and across all these technologies!
Competitors
Salesforce has already played the multi-cloud game. Last week, it announced that its Marketing Cloud will make use of Microsoft's Azure. This was quite a surprise considering the two companies are fierce CRM competitors! In July, the company made a deal with Alibaba to extend its services in China. Back in 2017, also at Dreamforce Investor Day, the company announced a partnership with Google Cloud, as it named as its preferred cloud provider for international expansion.
Back in 2016, it made Amazon Web Services as its preferred infrastructure vendor but the 4th year contract is nearing its end date, so the company is playing it safe to be in the multi-cloud business regardless of its renewal. And it developed Trailhead Go for Apple's iPhones and iPads, so it's pretty much everywhere.
Fiscal Year Results
This year the company is expected to generate $17 billion in revenue for its whole fiscal year. Moreover, it expects its revenue to be in the range of $34 billion and $35 billion by 2024, which is an impressive growth rate of about 20% annually. But management announced that the acquisition of MuleSoft was finally starting to come together. But the consequence of all those acquisitions is that after accounting for expenses, the company not generating as much profit, compared to its market peers. But the last time the CRM provider issued quarter earnings was in August with $0.66 EPS, beating the Zacks' consensus estimate of $0.09, net margin of 6.45%, a return on equity of 7.26%, with revenue amounting to $4 billion, also exceeding analysts' expectations of $3.96 billion.
The company is pushing its Customer 360 as a platform that is able to bring all the clouds together as this is what customers want: a simple solution which can bear it all. Customer 360 promises to be ‘a single source of truth' for customer data, no matter where the data resides, and that is no easy task.
Outlook
The projections that Salesforce shared were definitely encouraging. The 26% and 25% revenue growth rates in fiscal 2019 and 2018, respectively, are a proof of the company's ability to deliver on its new target. But to drive this revenue growth, the company has made a series of acquisitions that weighted on its margins.
The company also has stakes in other companies like Dropbox DBX through which it expanded its reach in the tech industry. So overall, it is no surprise that analyst estimates are in line with Salesforce's new 2024 predictions.
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