Tuesday, August 25, 2020

Will Salesforce Results Sail Past the Pandemic?

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News shaping
the markets today

     

What’s happening: Salesforce.com, Inc is scheduled to release its second-quarter results after the closing bell on Tuesday, August 25.

What happened: While the pandemic has forced companies to curtail their budgets and change buying decisions, the dependence on enterprise tech solutions has been rising.

Meanwhile, Salesforce is set to replace Exxon Mobil in the 30-stock Dow Jones index, with effect from before the market opens on August 31. The news sent the shares of the PaaS (platform-as-a-service) based customer relationship management software provider higher by 4% in extended trading on Monday.

What were the expectations: With various enterprise tech companies scheduled to release their results in the coming days, investors will monitor Salesforce’s report to gain some insight into how the sector is faring during the crisis.

  • The company’s quarterly revenues are expected to grow by 22.5% year-over-year to $4.9 billion.
  • Quarterly earnings are projected at 67 cents per share, representing a 1.5% year-over-year growth.

Why it matters: The San Francisco, California-based company has maintained a track record of reporting strong results over the past two years, exceeding expectations in every quarter.

However, the latest quarter has been unique, with most Wall Street analysts lowering their estimates for Salesforce over the past three months due to the impact of the pandemic on the economy.

Recent research also signals a mixed bag for the company’s results, with products including Service Cloud witnessing higher demand, but productivity tools not featuring in the priority list for customers.

Analysts project Salesforce’s billings growth, which is considered a key indicator of the health of enterprise software companies, at around 14% for the latest quarter.

During the quarter, Salesforce sold its stake in Zoom, with an estimated 600% return in 14 months, given the recent rally in the video-conferencing company’s stock. Salesforce has also sold its stakes in Dropbox and SurveyMonkey.

How shares performed recently: Investors are optimistic heading into Salesforce’s earnings call, sending the stock higher by 6% over the past five days. The stock has gained 11% over the past month. Shares are not far from their 52-week high of $210.11, which could be breached if earnings exceed views.

What to watch: Investors will monitor whether the company beats expectations again and closely watch management’s comments on how the pandemic has impacted its various businesses. Markets also look forward to the company issuing its guidance for the near term.

The Markets Today

     

Crude oil will be in focus today, ahead of the API’s (American Petroleum Institute) data on crude stockpiles scheduled for release later in the day.

Context: Crude oil closed higher on Monday with tropical storms forcing the closure of offshore drilling rigs in the Gulf of Mexico.

Details: The Gulf of Mexico, which accounts for over half of the region’s crude output, was forced to shut offshore drilling rigs in the area as a result of the Marco and Laura storms.

The Bureau of Safety and Environmental Enforcement projected that around 57.6% of existing oil production in the Gulf, along with 44.6% of natural-gas production, has been shut down.

Oil also found some support from the US FDA’s (Food and Drug Administration) decision to approve the emergency use of convalescent plasma from recovered covid-19 patients for treating new infections.

WTI (West Texas Intermediate) crude for October delivery gained 0.5% to settle at $42.57 per barrel on the NYMEX (New York Mercantile Exchange). The global benchmark Brent crude for October delivery rose 1% to end at $44.78 per barrel on ICE Futures Europe.

September natural gas climbed 2.1% to settle at $2.50 per million British thermal units.

What to watch: Investors await API’s report on crude oil stockpiles in the US. Inventories of crude oil has dropped 4.3 million barrels in the week ending August 14, versus a 4.5 million rise in the prior week.

Markets will continue to monitor the covid-19 numbers, with total cases surging past 23.6 million globally.

Other Markets: European indices were trading higher at 8:30am GMT, with the FTSE 100, French 40 and Dax 30 index up by 0.9%, 1.2% and 1.1%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

UK’s CBI distributive trades, Brazil's current account and foreign direct investment, Mexico’s current account as well as the US Redbook index, S&P Case-Shiller home price index, CB consumer confidence, new home sales, Richmond Fed manufacturing index and house price index.