The chase is on.... for performance that is. Now that the SPY has closed above $130, folks are rushing into stocks as the potential to miss the rally, outweighs the possible downside risks.
Now is the time to turn to those old stocks, still fundamentally sound, but beaten down.
Stocks to watch the next few days: PCLN CME ICE CRM.
We are also watching BLK for a bounce on Earnings this morning.
So the most bloated stock on the planet reported earnings after hours. No it doesn’t sell burritos… and no it doesn’t have anything to do with coffee. Salesforce.com, a darling of WallStreet since the 2009 rebound, reported after the bell with numbers that came in well above expectations. Not only did it beat revenue numbers and the EPS estimates, it raised guidance for next quarter and the next fiscal year. Good news right?
Well hold on. People were talking about CRM and its 600+ P/E ratio the entire week, and it seems folks got a little weak in the knees when they didn’t see a “Blowout” quarter.
Seemed the thing that people focused on was CRM’s bookings, which didn’t grow at it’s normal 30% clip and of course, that was the first question by the analysts on the conference call.
Yes, the CEO did sound like he was getting some action from Monica Lewinski as he read his script. But hey, who doesn’t want a CEO to sound bullish about his company?
We will see what the verdict on CRM is tomorrow. Bull.. Bear? I do think it will rally after the open. Retail Joe has no effect on the stock price, and those will be the ones who scream “Bloated Pig” and sell their 71 shares.
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.
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.
