CRM – SalesForce.Com Ready to rock or ready to roll???

Up and down… Buy and Sell… Short and Long… Easy market trades. At the end of each one of those, there is someone who is right, and someone who is wrong. Betting on a stock to go up or down would seem to be an easy thing to do, and when you bet on a stock to go down long enough, eventually you will be right. That was the case with NFLX… that was the case with GMCR to an extent, and now folks are saying CRM is the next one to tumble.

 

CRM
CRM - Salesforce.com

Why? Because it seems severely overvalued on a fundamental basis… more specifically it’s P/E ratio which currently sits at an insane 675. To put that in perspective, SAP (SAP AG), a very similar company, trades at a 19.69 P/E ratio. Is that enough reason for it to fall? We shall see as CRM reports its 3Q on Thursday with much anticipation.  Is the stock priced for perfection? A miss on either the EPS side, revenue side, or outlook side, could be devastating.

 

So what are we looking for on Thursday from CRM? $575 mil in revenues and a .31 EPS should keep folks some what happy, but I do feel CRM will need to beat estimates and be rosy about future prospects to really see some upside.

 

So you ask, what are my thoughts?

 

Glad you ask that question. The retail investor looks at this stock and says “Easy Short”…  Well that’s what they have been saying for over a year now. Myself on the other hand, Ithought this stock would be over $200 now, but the August sell off, and subpar results for Q2 stymied that move.

 

Now I think CRM is primed to move towards $200, macro environment permitting. Here is why… CRM is a best of breed stock. Like PCLN, it has had sustained huge growth, and has continued to grow. Last Quarter revenues grew at over 38%, and this Q shouldn’t be any different.

 

Look at the past 2 years of earnings growth:

 

31-Jul-11

20.31%

30-Apr-11

38.02%

Jan. 31, 2011

60.50%

Oct. 31, 2010

85.83%

31-Jul-10

112.37%

30-Apr-10

180.74%

Jan. 31, 2010

312.36%

Oct. 31, 2009

612.77%

 

This companies a beast and I really think she moves 10-15% after earnings. Last I will leave you with what the analysts are saying. I usually don’t side with the analysts, but seems to me they have been dead on. Well, that’s after they started believing in the company when it broke $100.

Jefferies Remains Positive on salesforce.com (CRM)

Salesforce.com expected to report an above consensus quarter, says Credit Suisse

Salesforce.com price target raised to $163 from $138 at Caris

Citi: Salesforce.com Has Ways To Win You Don't Even Know About

 

I will leave you with that. Chart is below and play accordingly.

 

CRM - Sales Force.com on 11-15

Profile photo of jimmybobJimmyBob (Scott)has been trading equities for over 15 years, a majority of which were OTC micro-cap stocks. He started trading high risk stock options over the past 7 years, and has proven winning trades in excess of 15,000%.

As one of the Co-Founders of optionmillionaires.com, Scott enjoys sharing his knowledge with other investors through timely blog posts, daily watch lists in the forum, weekly webinars, and helpful advice within the chatroom.

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