What Does Salesforce’s Chart Say Ahead of Tuesday’s Earnings?

12월 2일

Salesforce CRM will release its fiscal Q3 results Tuesday (Dec. 3) at a time when the customer-relationship-management software provider is up some 50% year to date, handily beating the S&P 500. Let’s see what the stock’s fundamental and technical analysis says.

Salesforce’s Fundamental Analysis

As I write this, analysts’ consensus estimate calls for Salesforce -- which offers increasingly cloud-based, AI-focused CRM software -- to report $2.45 in non-GAAP adjusted earnings per share on $9.4 billion of revenue for the three months ended roughly Oct. 31.

That would compare fairly well with $2.11 in non-GAAP EPS and $8.7 billion of revenues in the same period last year.

In late August, the firm guided revenues for the latest period to about $9.3 billion to $9.4 billion, so analysts’ consensus view is toward the higher end of that range.

Meanwhile, 24 of the 36 sell-side analysts that I can find who cover Salesforce have increased their earnings estimates since the current quarter began, while the remaining 12 have cut their numbers.

As for Salesforce’s balance sheet, the company had a $12.6 billion cash position as of July 31 after reporting $755 million of free cash flow in its fiscal Q2 and $11.5 billion over the trailing 12 months.

Current assets also totaled $21.9 billion as of July 31 vs. $21 billion in current liabilities.

That liability print included no short-term debt, but $15.2 billion in unearned revenue -- which as we know is not a true financial obligation, but an obligation of goods and/or services owed.

This put the firm's current ratio -- which was barely above the key 1.0 level at the headline -- at an envious 3.78 when adjusted for those unearned revenues. In my opinion, that’s a healthy balance sheet.

Salesforce’s Technical Analysis

Now let’s look at CRM’s year-to-date chart:

Readers will see that the stock has completed a “cup” pattern that began back in early March, and then added a “handle” just this month.

Now, as a cup adds a handle in a cup-with-handle pattern, a stock’s pivot point traditionally moves from the cup’s left-side apex to its right-side apex.

That would put CRM's pivot point at $348 -- not far from the $331.92 that Salesforce was trading at as of Monday morning. Obviously, a take and hold of that $348 pivot could prompt many investors to set a significantly higher target price for the stock.

Meanwhile, readers will also note that Salesforce has already taken and so far held its 21-day Exponential Moving Average -- or “EMA,” denoted with a green line in the above chart.

The stock has also taken and held its 50-day Simple Moving Average (or “SMA, denoted with a blue line) and its 200-day SMA (the red line above). So, there’s already an uptrend in place.

This is confirmed by Salesforce’s Relative Strength Index (or “RSI”), as marked with the gray line at the top of the above chart. Salesforce’s RSI was at 59.25 as I wrote this. Anything above 70 is considered to be technically overbought, but anything between 50 and 70 is considered to be positive.

The one potential fly in the ointment is Salesforce’s daily Moving Average Convergence Divergence indicator -- or “MACD,” marked with the black and gold lines and blue bars at the chart’s bottom.

The stock’s MACD is currently postured bullishly, but is in a tenuous position. Yes, Salesforce’s 12-day EMA (the black line) is above its 26-day EMA (the gold line) -- but just by a smidgen, and that always could change.

The stock’s MACD is now in a tenuous position. Salesforce’s 12-day EMA (the black line) is running concurrently with its 26-day EMA (the gold line). Both are still well above zero -- which is a positive -- but that could always change.

And one less-than-positive development is in the histogram of the stock’s 9-day EMA (the blue bars above). It has slipped slightly below zero -- not necessarily a warning sign, but a potentially skittish one.

Add it all up and I see Salesforce’s chart as a positive one overall -- but one that leaves just enough doubt to consider downsizing highly exposed positions, or at least hedging your risk ahead of next week’s earnings.

(Moomoo Markets Commentator Stephen “Sarge” Guilfoyle had no position in Salesforce at the time of writing this column.)

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