Salesforce.com (CRM) Stock: Takes A Dive On Weak Earnings

Salesforce.com, inc. (NYSE: CRM)

Salesforce.com is having an incredibly rough day in the market today, and for good reason. While the company beat expectations with regard to second quarter results, guidance was incredibly concerning, leading to declines. Today, we’ll talk about what we saw from the report, how the stock reacted to the news, and what we can expect to see from CRM ahead.

CRM Reports Solid Q2 Results | Guides Weak Ahead

As mentioned above, salesforce.com recently reported its financial results for the second quarter, beating expectations. However, as a result of weak guidance, the report had a negative affect in the market. Here’s what we saw from the report…

  • Earnings – In terms of earnings per share, CRM did incredibly well. During the second quarter, analysts expected that the company would generate earnings in the amount of $0.22 per share. However, the company actually reported earnings in the amount of $0.24 per share, beating expectations by about 9%.
  • Revenue – When it comes to revenue, CRM didn’t disappoint either. During the second quarter, analysts expected that the company would generate revenue in the amount of $2.02 billion. However, the company actually reported revenue in the amount of $2.04 billion. Not only did this figure beat analyst expectations, it proved an increase in revenue in the amount of about 25%.
  • Guidance – While revenue and earnings proved to be overwhelmingly positive, guidance proved to be a major cause for concern for salesforce.com investors. During the fiscal 2017 year, the company is now expecting to generate earnings in the range between $0.93 and $0.95 per share. Unfortunately, this was lower than previous guidance between $1.00 and $1.02 per share.

How The Market Reacted To The News

As investors, one of the first things that we learn is that it’s important to watch the news. This is especially true during earnings season. After all, a positive earnings report will generally lead to growth while a negative report will lead to declines. In this particular case, we got a bit of both. While earnings and revenue proved to be overwhelmingly positive for the second quarter, guidance raised questions. The big problem here is that the second quarter is already over. So, the impressive performance is done. The guidance is what’s most important now because it tells us what we can expect to see ahead. In this particular case, the guidance missed the mark, leading to declines. By the end of the trading session, CRM fell $3.51 per share or 4.42% to close the day off at $75.91 per share.

What We Can Expecting To See Moving Forward

Moving forward, I have a relatively bullish opinion of what we can expect to see from CRM. While guidance moving forward is a bit concerning, the company did incredibly well in the second quarter, and I believe that they may be guiding low in order to build investor confidence moving into the new year. All in all, I think we’ve seen the worst of the declines and that we’re likely to see gains ahead.

What Do You Think?

Where do you think CRM is headed moving forward? Join the discussion in the comments below!

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