Could Salesforce Stock Be Worth it Long-Term?

The security has seen a dramatic pullback from its November highs

Feb 10, 2022 at 10:46 AM
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Salesforce.com, Inc. (NYSE:CRM) was last seen down 1.9% to trade at $217.79, likely getting hit by the broader market selloff. The stock's selloff from its Nov. 9 record high of $311.75 has been steep and unrelenting, with several bear gaps putting it at a three-month deficit of 28.1%. However, this multi-month pullback appears to have stopped short at the $207 level, which also captured a smaller mid-May selloff. 

crm feb 10

Moreover, the software company has maintained consistent sales growth in recent years, increasing its trailing 12-month revenues 18% since fiscal 2021 and 88% since fiscal 2019. However, Salesforce has struggled on the bottom line, with its trailing 12-month net income experiencing a 57% decline since fiscal 2021. Nonetheless, Salesforce is expected to see a 1.1% increase in earnings and a 20.4% increase in revenues for fiscal 2023.

From a fundamental point of view, Salesforce stock’s valuation continues to be high, with CRM trading at a price-earnings ratio of 120.54 and a price-sales ratio of 8.32. Furthermore, Salesforce stock has a forward price-earnings ratio of 47.17, which would indicate a significant improvement yet is still a rich value given the cloud software company’s output. Even so, the stock presents a viable option for long-term investors searching for a mega-cap stock with a relatively high growth rate.

An unwinding of bearish sentiment among options traders could be a boon for CRM bulls, too. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock sports a 50-day put/call volume ratio of 1.13, which stands higher than all other readings from the past year. In other words, long puts haven't been more popular in the last 10 weeks. 

 

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