salesforce.com, inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions

There's been a notable change in appetite for salesforce.com, inc. (NYSE:CRM) shares in the week since its full-year report, with the stock down 12% to US$217. The result was positive overall - although revenues of US$21b were in line with what the analysts predicted, salesforce.com surprised by delivering a statutory profit of US$4.38 per share, modestly greater than expected. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

View our latest analysis for salesforce.com

After the latest results, the 38 analysts covering salesforce.com are now predicting revenues of US$25.7b in 2022. If met, this would reflect a substantial 21% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to nosedive 86% to US$0.62 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$25.4b and earnings per share (EPS) of US$0.81 in 2022. So there's definitely been a decline in sentiment after the latest results, noting the pretty serious reduction to new EPS forecasts.

It might be a surprise to learn that the consensus price target was broadly unchanged at US$276, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on salesforce.com, with the most bullish analyst valuing it at US$320 and the most bearish at US$200 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. Next year brings more of the same, according to the analysts, with revenue forecast to grow 21%, in line with its 23% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 13% per year. So although salesforce.com is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for salesforce.com. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple salesforce.com analysts - going out to 2026, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with salesforce.com (at least 1 which is significant) , and understanding them should be part of your investment process.

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