Despite Multiples, Salesforce.com Shares Rise On Raised & In-Line Guidance (CRM)

Salesforce.com (NYSE: CRM) has just posted a more than ten-fold rise in net earnings with $0.06 EPS on a 50% gain in revenues to $216.9 million.  First Call had estimates pegged at $0.04 EPS on $209.2 million in revenues.

The company also gave guidance of $0.06 to $0.07 EPS on $233 to $235 million in revenues versus estimates of $0.06 EPS on $228.5 million in revenues.  Its Fiscal January 2009 guidance is now $0.32 to $0.33 EPS on revenues of $1.03 to $1.035 Billion, while estimates are $0.33 EPS and $1.03 Billion in revenues.  While this is raised guidance, it looks mostly in-line with estimates.

Salesforce.com’s paying customers rose approximately 2,900 during the quarter and approximately 11,200 during the year to finish at approximately 41,000.  Net paying subscribers rose to nearly 1.1 million, an increase of more than 450,000 from a year ago.  Deferred revenue was listed as $481 million, up 69% year over year and up 41% from the prior quarter.

Based on closing prices and at the mid-point of guidance, this one now has a forward P/E ratio of 161 and trades at 6-times forward revenues.  As of mid-February, Salesforce short interest was just over 7.36 million shares or almost four days worth of volume.

Salesforce.com traded down 0.2% to $52.62 in normal trading and its 52-week trading range is $37.24 to $65.52.  Shares are currently up more than 3% to $54.40 in after-hours trading.  It looks like investors are willing to pay up for companies that are in-line when many are not, even if valuations are high.

Jon C. Ogg
February 27, 2008