Salesforce, like Microsoft, was – and is – a major technological player, both before and throughout the pandemic. While Microsoft takes care of the processing and computer software side of the business, Salesforce focuses more on the customers.
As a company that invests most of its resources into its CRM – customer relations management – software, Salesforce handled the front-end side of thousands of companies even before the pandemic. After quarantines took effect, the need for a technology-based customer relations team skyrocketed. Salesforce filled that void – and its prospects (and stock prices) leapt right along with it.
However, it’s not just the pandemic that boded well for the organization, although it definitely helped. This month, Apple announced an unprecedented move: a 4-for-1 stock split that’s predicted to have a drastic impact across weighted technological sectors. One such index to feel the effects is the Dow Jones Industrial Average.
As a direct result of Apple’s latest move, it was announced that Salesforce will replace Exxon Mobil in the Dow Jones. This will adjust the weighted index’s numbers to ensure that technology commands roughly 25% of the index overall. Salesforce will officially take its new place before the market opens on Monday, August 31. But what does this mean for the average investor?
Qai’s deep-learning AI (artificial intelligence) has compiled and scoured the data extensively for months. And now, the results are in for the month of August – let’s dive in to see what the numbers have to say.
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Salesforce closed up 0.45% last week, ending at $208.46 per share on volume over 5.44 million. This marks a month of relative price increases, shown by the 10- and 22-day prices averages of $200.46 and $198.50, respectively. Overall, the stock is up almost 25% for the year.
The company has seen a decent year in some of its other metrics in spite of the pandemic. For instance, revenue is up 6.6% over the last fiscal year alone. However, this is nothing compared to the 73% revenue increase over the last three fiscal years, from $10.5 billion in 2017 to $17.1 billion this year.
Operating income has received a much smaller boost in comparison: up 10% in the last three years, from $454 million to $503 million. However, this is where the good news stops.
While Salesforce, as other technological behemoths, has used the pandemic to expand operations where possible, it’s come at a cost for its investors. For example, whereas EPS was $0.49 three years ago, it’s since dropped to a paltry $0.15. Furthermore, the company’s ROE plunged right alongside its EPS, from 4.03% to a measly 0.51% this year.
Additionally, while the company is trading at a rather high forward 12-month P/E of 68.79, its forward 12-month revenue is only expected to grow by about 3%.
What’s the Verdict?
Salesforce may be taking its place on the Dow Jones, but that doesn’t mean that the company’s prospects bode well for investors. While there may be some money to be made in the future, now is not the time to buy in – and our AI agrees: this company is below average.
For instance, while Salesforce rates an A in Technical, that’s where the good news stops. The company has earned average or below ratings in the rest of our markers: C in both Momentum Volatility and Quality Value, and a big, fat F in Growth. As a result, our AI has marked this company an Unattractive prospect for the month of August.
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