AI stock Salesforce is Wednesday's IBD 50 Stocks To Watch pick. The leading customer relationship management (CRM) stock is in a base and holding above a key chart level.
Salesforce develops cloud-based CRM software designed to service customers in a shared platform. Its business model is software as a service, otherwise known as SaaS.
Its Customer 360 flagship platform is designed to allow product, sales, service, marketing, commerce and IT teams combined access to customer information in a single, shared view.
Salesforce's deep learning generative AI model Einstein GPT powers its 360 platform and is designed to be used with any large language model (LLM).
Its AI features automate manual processes, write AI-generated emails and code, boost productivity, make product recommendations and assist in selling.
Oher products include data integration platform MuleSoft, analytics reporting software Tableau, and business collaboration and chat platform Slack. Salesforce serves more than 150,000 companies worldwide in an array of industries.
AI Stock Holding Steady In A Base
The AI stock is in a sideways consolidating base with a 238.22 buy point, which is also the 52-week high set on July 19. The new base formed after the stock broke out of a flat base on July 12, hitting the 225.00 entry before topping out at the 238.22 high.
The peak was short-lived as the stock started its steep 16% descent, where it fell below its 50-day moving average on the way to the bottom of the base. It found support at the psychologically significant 200 level. A trendline appears around 200.
The Dow Jones stock climbed off the bottom then jumped 3% in heavy volume, following the better-than-expected July-ended quarterly earnings report, issued late Aug. 30. Shares reclaimed the 50-day line on the move, then stalled the next day. Shares are holding above the 50-day line without making much progress.
The AI stock gained 66% this year so far, but is still about 7% off its 52-week high.
Earnings Beat And Raise
Salesforce reported 78% quarterly earnings growth, the fourth consecutive quarter of EPS growth after several declining quarters. The prior two quarters saw growth of 72% and 100%. The company in the latest quarter beat earnings expectations by about 33%, according to IBD's Leaderboard.
Sales growth has been modest and fairly consistent, with two quarters of 11% sales growth following two quarters of 14% growth.
Quarterly gross margin grew to 75% from 72% over last year's same quarter.
"Based on our performance and what we see in the back half of the year, we're raising our fiscal year 2024 revenue, operating margin, and operating cash flow growth guidance," said Marc Benioff, chair and CEO of Salesforce, in the earnings release.
Salesforce raised its fiscal third-quarter revenue guidance to $8.7 billion-$8.72 billion, or about 11% growth over the prior year's quarter. In addition, it lifted its full-year fiscal 2024 revenue outlook to $34.7 billion-$34.8 billion, also about 11% growth. The company remains focused on developing its generative AI-based products.
Analysts expect 41% full-year EPS growth this year and 12% next year, according to FactSet.
Mutual funds added shares in June, with 4,470 funds owning the AI stock, up from 4,327 in March and 4,142 in December.
Lastly, CRM holds an enviable 98 IBD EPS Rating out of 99, and a 97 Composite Rating.
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