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Strong Guidance Signals Opportunity With Software Giant

Real Money Columnist Stephen 'Sarge' Guilfoyle says latest financial results show positive trends that have yet to be rewarded by the market.
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Software stocks have taken a beating lately.

One especially stands out to Real Money Columnist Stephen “Sarge” Guilfoyle.

The software services giant Salesforce.com  (CRM) -  reported its latest financial results recently, which Guilfoyle looked at closely.

In particular, Salesforce increased its FY 2023 revenue guidance to $32 billion to $32.1 billion from $31.7 billion to $31.8 billion, beating Wall Street’s estimate of $31.8 billion. The company estimates full year adjusted EPS at $4.62 to $4.64.

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“The guidance is between solid and very good in my opinion,” . “While investors are being asked to put up with some GAAP margin pressure as the firm digests its many recent acquisitions, there appears to be no corporate doubt about the firm's ability to grow sales in this environment."

Salesforce reported fourth-quarter adjusted EPS of $0.84 on revenue generation of $7.33 billion, which both beat Wall Street estimates. The company grew revenue by 25.8%.

The stock has reversed its downtrend that began in early November. And Guilfoyle notes "just an FYI... Salesforce does little to no business in Russia or Ukraine.”

The company’s Current Remaining Performance Obligations or CRPO, which tallies future revenue under contract expected to be recognized within 12 months, sat at $22 billion, an increase of 22% year over year. Salesforce’s Performance Remaining Obligation or PRO, which counts future revenue under contract without the one year timeline, rose by 21% to $43.7 billion.

Guilfoyle has a target price of $271 on the stock. “Yes, I am long CRM, so there's a chance that this is biased work, but it is my work, and it is my honest assessment,” Guilfoyle  wrote in a recent Real Money Pro column. “Good thing, the shares are nowhere near being overbought.”