NEW DIRECTIONAL CALL PLAYS
Salesforce.com, Inc. - CRM - close: 66.43 change: +1.83
Stop Loss: 62.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 4.5 million
Entry on March -- at $---.--
Listed on March 16, 2015
Time Frame: Exit prior to May option expiration
New Positions: Yes, see below
Why We Like It:
This year could be a good one for shares of CRM. The stock spent most of last year churning sideways in the $50-65 range. CRM managed to end 2014 with a +7.4% gain, which underperformed the major indices. Today CRM is up +12% in 2015 and that's after a correction from its post-earnings highs in February.
Marc Benioff is CRM's CEO and Chairman. After CRM's recent Q4 earnings report Benioff said, "Salesforce reached $5 billion in annual revenue faster than any other enterprise software company and now it's our goal to be the fastest to reach $10 billion."
If you're not familiar with CRM the company describes itself as "Salesforce.com is the world's largest provider of customer relationship management (CRM) software. Our industry-leading CRM platform has become the world's leading enterprise cloud ecosystem. Industries and companies of all sizes can connect to their customers in a whole new way using the latest innovations in mobile, social, and cloud technology to sell, service, market, and succeed like never before. Salesforce has headquarters in San Francisco, with offices in Europe and Asia."
Their most recent earnings report was February 25th, after the closing bell.
CRM's Q4 2015 earnings and revenues were both in-line with estimates at $0.14 a share on sales of $1.44 for the fourth quarter. Revenues were up +26% in the fourth quarter and up +32% for the full year. They were up +29% in the fourth quarter if you account for currency headwinds.
Almost 93% of CRM's sales are their subscription software business. In the fourth quarter their subscription software service was up +25% and their professional services subscription was up +41%.
Back in fiscal year 2014 CRM signed 100 big deals in the seven-to-eight figure range. This past year the number of big deals surged to 550. Analysts were happy to see CRM's deferred revenues grow, which jumped +32% in the fourth quarter, up from +28% in the third quarter.
Benioff commented on their results, "Salesforce delivered yet another year of exceptional growth, with revenue, deferred revenue and operating cash flow all growing more than 30%, while exceeding our expectations in non-GAAP operating margin improvement."
CRM guided for +21% sales growth in 2016 (up to $6.52 billion). This was just above their prior guidance and in-line with Wall Street estimates. The company now expects their 2016 earnings in the $0.67-0.69 range compared to analysts' estimates of $0.69. Consensus estimates are for $6.5 billion in sales.
Wall Street analysts praised CRM's results. There was a parade of price target upgrades. Most of the new price targets are in the $79-80 range.
Shares have filled the gap from its post-earnings pop and investors have stepped in to buy shares at new support (prior resistance). Today's rally looks like an opportunity. We are suggesting a trigger to buy calls at $66.75.
Trigger @ $66.75
- Suggested Positions -
Buy the MAY $70 CALL (CRM150517C70) current ask $1.84
Option Format: symbol-year-month-day-call-strike