Cloud stock Salesforce is back in a buy zone after a volatile period following its latest earnings report. The enterprise software stock is Wednesday's IBD 50 Stocks to Watch pick.
The San Francisco-based customer relationship management (CRM) platform developer combines customer service, marketing automation, e-commerce, analytics and application development in its Customer 360 platform.
The software platform allows a variety of teams to view and share customer information on a single page.
Salesforce's other products include the workplace messaging app Slack, analytics platform Tableau, artificial intelligence platform (AI) Einstein and the automation platform MuleSoft.
Salesforce launched its AI technology Einstein GPT on March 7. The chat bot tool assists the Customer 360 platform by creating AI-generated chat conversations and emails.
The enterprise software stock holds the No. 1 spot out of 129 stocks in the enterprise software industry group. The group ranks a midway No. 107 out of 197 IBD groups. The CAN SLIM investing strategy looks for stocks in the upper 40 rankings, although leaders can be found in lower group rankings.
Cloud Stock Back In Buy Zone
The Dow Jones Industrial Average stock posted better-than-expected January-ended quarter earnings per share and sales March 1. Shares gapped up 11.5%, past the 178.94 buy point of a cup-with-handle base the following day in the heaviest volume since the base started.
CRM fell for six consecutive days before finding support at the 21-day exponential moving average. And on Wednesday CRM stock was back above the buy point.
Because the stock gapped above its buy point, the buy zone must be adjusted. Use the first 5-minute high of the gap's day and add 5% to obtain a more credible buy area. And since Salesforce shares fell below the 178.94 buy point, that resets the buy zone from that level to 187.89.
CRM gained over 36% this year, but is still about 18% off its 52-week high.
Salesforce Posted 100% EPS Growth
Salesforce beat EPS and sales expectations and posted an impressive 100% EPS growth in its January-ended quarter earnings report. The increase was a sharp improvement over 10% growth in the October-ended quarter and EPS declines in several previous quarters going back to 2021.
Sales grew at a slower 14% pace in the last two quarters, after the company posted gains of 22% to 27% the previous five quarters. In the earnings report, management also announced it increased its stock buyback by $20 billion, on top of its $10 billion 2022 buyback.
Analysts forecast 36% annualized fiscal 2024 EPS growth, and 25% in 2025.
Mutual funds own 46% of shares, with 4,100 funds holding the cloud stock in December, down from 4,110 and 4,168 in the prior two quarters. CAN SLIM looks for increasing institutional ownership in a stock showing conviction, as big money managers can boost the stock price with large purchases.
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