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How to prepare for Salesforce (CRM) Earnings Release

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.

Screenshot 2023 11 29 at 8.20.40 AM

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.

Screenshot 2023 11 29 at 9.21.19 AM

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.

Screenshot 2023 11 29 at 9.27.07 AM

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.

Screenshot 2023 11 29 at 9.29.18 AM

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.

Screenshot 2023 11 29 at 9.31.55 AM

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