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Salesforce (CRM) is due to report earnings after close today. In this article we want to look at Market Trends, Positioning and Sentiment ahead of earnings.

Salesforce is projected to see a moderate sales growth of 11% in constant currency across various quarters, a slowdown compared to the previous year. 

The company’s current remaining performance obligations are expected to rise similarly, reflecting a deceleration in customer acquisition and spending. Despite this, adjusted earnings per share (EPS) are set to surge significantly, driven by an expanding operating margin. 

Key cloud products, like the Marketing and Commerce Cloud, are expected to register steady gains. Long-term, Salesforce aims to boost sales by 11-13% in constant currency, supported by increased pricing and customer spending, while maintaining a strong focus on margin improvements and cost efficiency. 

The company’s strategy includes a notable emphasis on generative AI initiatives, though significant contributions to sales from these are not expected in the short term. Compared to industry peers, Salesforce’s profitability and margin improvements are especially highlighted, positioning it favorably in the software application market despite near-term economic challenges.

Here we can see Analyst Estimates on Revenue and EPS.

Source: Yahoo! Finance

Key Highlights from August 30, 2023 Earnings Call

Let’s look at some key highlights from their latest Earning Call from August 30, 2023. This is what emerged in that event.

• Profitable Growth Focus: Salesforce emphasized its transformation toward profitable growth, highlighted by a significant rise in non-GAAP operating margin to 31.6%.
• Strategic Restructuring: The company has undergone restructuring for both short and long-term benefits, focusing on productivity and operational excellence.
• Core Innovations and AI Emphasis: Salesforce is prioritizing innovations in its core offerings, including enhancements to Data Cloud and Einstein, and integrating AI across its CRM platform.
• Financial Performance: Reported Q2 revenue of $8.6 billion, an 11% increase year over year, and a substantial rise in operating cash flow to $808 million.
• Data Cloud Growth: The Data Cloud is showing strong growth and integration with Salesforce’s suite of applications, underlining its importance in the company’s strategy.
• AI as a Growth Driver: AI is seen as a key factor in driving future growth, with new AI capabilities being integrated across Salesforce products.
• Shareholder Focus: Continued emphasis on shareholder value, demonstrated through significant share repurchases and disciplined capital allocation.
• Adapting to Macro Environment: Despite economic challenges, Salesforce maintains a robust growth strategy, leveraging AI and data to enhance customer success.

Market Positioning using Options Data

Now let’s look at Investors Positioning coming from the Options data from November 28th, 2023.First let’s look at the Net GEX Chart. Here we can see the Sticky Strikes. The Call Resistance Level is at $230, while the Put Support is at $200. We also see large activity on call options around the $240 and $250 strikes.

If we look at the Liquidity Snapshot we can see that we are in Positive Gamma. You can read how Market Makers hedge in Positive and Negative Gamma.

Then we can look at Volumes and Open Interest. We can see large Call Open Interest on the $230 and $240 Strike. The Open Interest Put/Call Ratio is 1.18.

Finally the Option Matrix. What we want to see here is the importance of key expiration dates. We see that almost 11% of Expiring GEX is for the 12/01/23 expiration while 36.8% of GEX will expire on 12/15/2023. These are key dates to monitor as an investor.

If you want to access this data on Stocks, Indices and ETFs you can try our Premium Membership.

We have finally released our new website: MENTHORQ.COM, and have already received positive feedback from the community. 

We are trying to simplify your journey and allow you to find information as soon as possible. All of the most important information are located under the Resources Section. 

Under the News Flow you will find all our new daily content as well as the weekly newsletter that you are currently reading. This will help you to stay up to speed without daily content, and our weekly education material as well as updates on the project. The next important section is the Guides.

On the left hand side of the guides you will find an index column that will help you navigate through all of our content. You will find educational material if you are getting started, but also more advanced one. Please let us know if the simplified navigation helps you find the content you need.

What is next? 

By the 15th of December we will be ready with our Option Screeners. Stocks Screeners allow investors to filter and search for specific stocks or securities that meet predefined criteria. 

These criteria can be based on various factors, including fundamental, technical, and other quantitative parameters.  With the Menthor Q Screeners you can now receive a daily list of stocks matching quantitative parameters. By leveraging our quantitative models you can now find the most relevant assets and enhance your research.

The screeners will be a great tool, because every morning you will have stocks, index and ETFs screened based on certain parameters. This is what our screeners will be based on:

• Key Greek Levels screeners: here you will find different screeners that filter based on the key gamma levels from our models. An example, will be the filter Call Resistance + High Positive Net Gex. This type of screener will help you find stocks that have more potential to see a roll higher of the Call Resistance level, hence find assets that have more potential for breakout.
• Volatility Screeners: as we know volatility is mean reverting. We will use IV rank, Low/High Gex volatility ratios and so on. The objective is to find assets that allow you to sell options or assets where a potential volatility breakout is possible.
• Gamma Levels: we want to look at assets by monitoring gamma and delta. GEX and DEX become the key parameters here. Here we look at the changes in Net Gex, DEX and Open Interest to identify areas of change in the option chain. We also monitor GEX and open interest close to expiry. Again this way we can identify possible volatility or market moves. 
• Volume and Open Interest: here we monitor unusual activity with aim to track market outliers

Here you can find an example of how these screeners will work. They will be found in their own section in the BOT. 

Trade Structuring Channel

Finally, next week we will be finalizing the new Trade Structuring Channel in Discord. This is going to become another key tool. It will help you to read better our models, put them into context and use them to structure a trade. We will have a key dedicated member of the team to run the channel. 

Questions can be asked within the channel. We are very excited about this new features, because it should really help speed up your learning and understanding of our model. 

That has been one of the key requests that you have made since the inception, a way to simplify what we have offering. On that note, we are also finalising all of the answers that you have sent us in the last six months. 

We have created a file with questions from students that took the course and premium users. The file is already 40 pages long, and we think it will be another additional education tool to help you. 

The file will be available for free to anyone that bought the course and our premium subscribers. This will be sent out to you the first week of December. 

The Menthor Q Team

Oil has been on an incredible run in the last month. A series of things have led that rally, but most and foremost is the energy translation. Whether one agrees on it or not, the energy translation has created a supply shortage. 

As funding becomes harder for conventional oil, upstream producers have been incentivised to reduce capex and favor dividends. On top of that, we have had the Ukrainian crisis and OPEC+ cutting production. 

Today we will talk about oil’s latest price action, to show that Friday’s adjustment was getting set up. We had been talking about oil for a week or so, and had raised the fact that Oil was very stretched. 

In the next few weeks we will release our Options Screeners that will be able to help you better filter Stocks, ETFs and Indices based on the option chain data. Those will be the V1 version of our screeners. 

We will then go on and layer in momentum features to get confirmation of what we are seeing in the option chain. Eventually, we will also have macro inputs and AI. As usual, as we build we will create supporting material to help you understand it. The screeners will be at no additional cost for Premium Members.

Positioning on Oil

The first thing we started to look at was the oil positioning, specifically we took this chart from Bloomberg where one could see how stretched money managers long/short funds were.

Q-Models on Oil via our Discord Bots

Using our Query Bot you can go one step forward and download all our models. We created a Guide to learn how to use the Bots. Here you can find the list of Bots Commands.

Right now you can use $USO, the biggest Oil ETF. While not perfect it is helpful. Option positioning on commodity futures is coming up soon. There are different features that you can use. 

To start you can take a look at the one day expected move, that will show you based on volatility how we expect next day price movement. This is the query you can use: /mainchart. 

A good way to screen for a stretched asset is to compare the 1D Exp Move against the Call Resistance Level. Generally the call resistance level works like a bounce level as calls get monetized and market makers close their length that helps them delta hedge. 

This pull back is not necessarily bearish, but more like a technical adjustment. Best way to compare is to download our levels on TradingView. This is the query in the Query Bot: /levels_tw ticker.

Next we compared what we were seeing on Bloomberg with our own models. We took the Brent CTAs. Here you can clearly see that we were very stretched. Remember CTAs add liquidity once certain price levels are triggered, they do not drive that movement. In our Bot we upload everyday all our CTA Models.

Technical Move on Oil

Then we looked at some Technicals. While we rely mainly on option positioning, we like to layer in Technicals and Momentum analysis. For that we already have models ready to be released to our users. Those should be used for confirmation. More on that coming soon. 

As we could see from this chart, the RSI was extremely stretched. 

Friday, we saw the technical pull back that we were expecting. Again, all of these moves are going to be a lot clearer when we have options on futures. Will be there shortly!