By Peet Serfontein & Hashmeel Suka
Salesforce.com is a cloud-based software company that designs and develops enterprise solutions. The company offers a leading customer relationship management (CRM) service to businesses worldwide, providing an innovative technology platform for users to build and run applications focused on sales, analytics, marketing, and customer service.
The company has displayed exceptional growth over the past five years, with adjusted EPS and revenue climbing ~24% and ~21%, respectively (on a compounded annual basis). This has been driven by rapidly growing demand for cloud-based software services, with more businesses shifting towards a digital operating model.
Technically, the stock is trading in the fifth and final wave of the Elliot Wave pattern, representing one last push in the direction of the primary bullish trend. This final wave is typically associated with strong investor sentiment, particularly given an influx of new demand and hence, increased buying pressure.
The stock has also displayed lower rolling volatility over the past two months (refer to the insert on the first chart), with recent price stability suggestive of improved sentiment among investors. This is a bullish indicator.
The stock remains just below the 200-day simple moving average (SMA) of $267, making for an attractive entry point given the various bullish indicators.
Emerging upside momentum according to the MACD indicator as well as upwards movement of the On-balance Volume indicator, supports our bullish stance.
Share Information
| Share Code | CRM US |
|---|---|
| Industry | Software & Services |
| Market Capital (USD) | 256 billion |
| One Year Total Return | 25.15% |
| Return Year-to-Date | 0.69% |
| Current Price (USD) | 264.20 |
| 52 Week High (USD) | 318.72 |
| 52 Week Low (USD) | 193.68 |
| Financial Year End | January |
| The stock has recovered well following a sharp sell-off in May this year, and various technical indicators are guiding for further upside ahead. |
Consensus expectations
(Bloomberg)
| FY24 | FY25E | FY26E | FY27E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | 8.22 | 9.91 | 10.99 | 12.53 |
| Growth (%) | 20.56 | 10.93 | 13.94 | |
| Dividend Per Share (USD) | 0.00 | 1.60 | 1.44 | 1.43 |
| Growth (%) | - | -9.83 | -0.69 | |
| Forward PE (times) | 25.09 | 22.25 | 21.09 | |
| Forward Dividend Yield (%) | 0.60 | 0.55 | 0.54 | |
| Earnings growth is expected to be decent over the medium term. | ||||
Buy/Sell Rationale
Technical Analysis:
Fundamental view:
| Share Name and position | KDP US - Take profit (Close the position) | HD US - BUY (Continue to hold) | BALL US - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 34.12 | 353.79 | 61.71 |
| Current | 36.37 | 373.18 | 64.06 |
| Movement | +6.6% | +5.5% | +3.8% |
| We suggest closing the position for an early profit take. |
The formation of a symmetrical triangle pattern is attractive. The stock remains above the 200-day SMA. Upside price momentum is supportive.
Our profit target is $395, with a trailing stop-loss of $356. Exit the trade by 11 October 2024. |
The development of a broadening bottom pattern remains of interest. The stock remains above the 200-day SMA. Fading downside price momentum supports the trade strategy.
Our profit target is $69, with a trailing stop-loss of $61.00. Exit the trade by 7 February 2025. |
| Share Name and position | GIS US - Buy (Continue to hold) | LYB US - Buy (Continue to hold) | AVY US - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 69.20 | 95.48 | 212.51 |
| Current | 71.03 | 97.71 | 217.42 |
| Movement | +2.6% | +2.3% | +2.3% |
|
Price action above major support remains attractive. The stock remains above the 200-day SMA, and upside price momentum is supportive.
Our profit target is $77.00 with a trailing stop-loss at $67.80. Exit the trade by 16 October 2024. |
Price action at the upper range of a price distribution is attractive. The stock is testing the 200-day SMA, and emerging upside momentum is supportive.
Our profit target is $105 with a trailing stop-loss at $93.60. Exit the trade by 2 October 2024. |
The positive Sharpe ratio trend (improved risk-adjusted returns) is attractive. The stock is trading above the 200-day SMA with fading downside momentum being supportive.
Our profit target is $237, with a trailing stop-loss of $207.70. Exit the trade by 6 December 2024. |
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