What Does Salesforce’s Chart Say Heading Into Earnings?Customer-relationship-management technology giant Salesforce NYSE:CRM will release fiscal Q1 results next Wednesday (May 28). What do CRM’s chart and fundamentals say heading into the report?
Salesforce’s Fundamental Analysis
Next week’s numbers could be key for shareholders, as readers might recall that back in February, the firm issued revenue guidance for the current fiscal year that disappointed Wall Street. That sent CRM shares down some 4% the next day.
For next week’s report, the Street is looking for $2.55 in adjusted earnings per share on roughly $9.75 billion of revenue.
That would compare somewhat well to the $2.44 in adjusted EPS on $9.13 billion of revenue during the same period a year ago -- representing some 6.7% of revenue growth.
Investors will also be watching next week’s report for metrics such as subscription-based revenue, as well as both current and total remaining performance obligation.
Free cash flow will also be in focus. For Salesforce’s fiscal Q4 ended Jan. 31, the firm generated $3.97 billion of operating cash flow.
Out of that number, the firm spent just $154 million on capital expenditures, leaving $3.816 billion in free cash flow for the quarter and $12.434 billion for the fiscal year as a whole. That last number was up 31% from the year prior.
Still, analysts have grown increasingly negative on Salesforce’s upcoming results as next week’s earnings date approached.
Of the 37 sell-side analysts I found that track the stock, 31 have revised their estimates for adjusted earnings lower since the current quarter began. Just six have revised their forecasts higher.
Salesforce’s Technical Analysis
Now let’s look at CRM’s chart going back to September:
Readers will first see that Salesforce has recently shown some minor weakness. The stock appears to be feeling its way around its 21-day Exponential Moving Average (or “EMA,” marked with a green line above) as CRM searches for support.
The chart above also shows a near-perfect “double-top” pattern of bearish reversal, marked with the black box at left above. That pattern stretched from October into late February, producing a significant sell-off.
But then the sell-off morphed into a near-perfect double-bottom pattern of bullish reversal.
A rally coming out of that pattern could potentially take the stock considerably higher, as the “pivot point” (the apex of the center spike above) stands at $268.
Salesforce closed Thursday at $283.42 -- about 6% above the pivot -- but in a tech/AI/growth stock like CRM, breakouts from a pivot have often gone for 15% or even more.
Case in point -- on the way down, Salesforce’s recent sell-off ran to 26.7% below the pivot point.
However, there’s one big difference between CRM’s sell-off and its subsequent rebound.
On the way down, Salesforce cut like a hot knife through butter across its 200-day Simple Moving Average (or “SMA,” marked with a red line). But on the way up, the stock hit its 200-day SMA on May 14 like a brick wall, going lower from there for several days.
Looking at other Salesforce’s other technical indicators, the stock’s Relative Strength Index (the gray line at the chart’s top) looks strong, as well as nowhere near being technically overbought. That's traditionally a positive sign.
That said, the stock’s daily Moving Average Convergence Divergence indicator (or “MACD,” marked with black and gold lines and blue bars at the chart’s bottom) is starting to look like it could be out of gas.
Within the MACD, the histogram of the 9-day Exponential Moving Average (or “EMA,” denoted by blue bars) has come in and now barely stands above zero.
As for the 12-day EMA (marked with a black line) and 26-day EMA (the gold line), they’re both above zero -- which is usually a positive.
However, the 12-day line appears to be on the precipice of crossing below the 26-day line. That could be seen as a bearish signal.
(Moomoo Technologies Inc. Markets Commentator Stephen “Sarge” Guilfoyle had no position in CRM at the time of writing this column.)
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