One highlight for the company was the highest-ever operating margin at over 20%. Revenues have stagnated on a quarterly basis for Salesforce and net income could revert back to the April and January earnings where net income was $99m and -$248m. GAAP EPS was also benefited by $2.17 as the company changed its international corporate structure which included a consolidation of certain intangible properties resulting in a $2 billion net tax benefit related to foreign deferred taxes. These mark-to-market adjustments benefited GAAP EPS by approximately $0.55 and non-GAAP EPS by approximately $0.58. The Q2 release went further to clarify the effect of this earnings boost, saying: The company saw a beat on earnings per share in the second quarter but this was boosted by "realized and unrealized gains… notably due to the nCino IPO." Second-quarter earnings per share beat was a one-off This year has seen a boost for 'work from home' and enterprise tools but with a vaccine on the horizon and the potential for higher corporate taxes, the walls might be closing in on Salesforce. Research and development costs are soaking up a large part of the company's finances and this can be factored in, but it's still worth thinking about how much we want to pay as a sales multiple. The company outperformed on earnings per share in the last quarter but the problem for investors is that revenues are growing at 27% annually, while expenses are growing at the same pace, so the big picture is being masked by short-term returns. Full-year fiscal 2021 revenue is expected to rise 21% to $20.77 billion, with FY22 expected to show a 17% rise. Salesforce will release their third-quarter earnings this week on December 1st. Salesforce set to release third-quarter earnings Salesforce will maybe have to bundle Slack in order to compete with Microsoft so that clouds the revenue picture further. Slack saw revenues of $640m for FY2020 but costs were $1.2bn and this led to operating income of -588m so the acquisition may not be straight-forward for adding revenues. I wish that whole cultures could change overnight. You can't move from e-mail to channel-based messaging in that short amount of time. Slack CEO Stewart Butterfield said in the company's Q1 earnings release: With the rise of Zoom and other video-based platforms, a messenger app still has its drawbacks. Salesforce previously said that Teams was not a competitor but growth in the platform to 115 million users, from 75 million in April, has obviously changed their mind. Last year saw Salesforce integrating the Slack app and more recently, the company released a similar app for Microsoft Teams, so it's clear that the company wants to gain more control over their app and it will also provide some leverage against Microsoft. Sales are based on seat sales per customer and the company has struggled through downsizing in the industry as a result of the lockdowns.įor Salesforce, the Slack acquisition is more about challenging Microsoft ( MSFT). The deal isn't a cheap one for investors with Slack currently valued at 28x sales, while its revenues were only up 11 and 7% in the two quarters since January, despite a rally in 'work from home' and enterprise tools. The deal would value Slack somewhere around the current market cap of $22 billion and would mark the largest acquisition ever by Salesforce. The Wall Street Journal has reported that the Salesforce ( NYSE: CRM) deal for Slack ( WORK) is imminent and could be tied up early in the week. The company releases Q3 earnings this week and this investment thesis is geared at showing that Salesforce is overvalued at the present moment. Salesforce was in the news this week after reports that the company was looking to acquire enterprise chat firm Slack Technologies.
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