Cloud Stock Scaling NYSE After Earnings, Bull Notes

Salesforce reported better-than-expected full-year guidance

Patrick Martin

Managing Editor

Aug 23, 2019 at 10:12 AM

A big earnings winner on Wall Street this morning is Salesforce.com, Inc. (NYSE:CRM), up 5.8% to trade at $156.86. The cloud name reported second-quarter earnings and revenue that topped estimates, while third-quarter and full-year guidance also beat forecasts. A higher demand for cloud software, plus its recent acquisitions, fueled the blowout report.

So far, no fewer than 11 brokerages have come forward with price-target hikes. The highest comes from Monness Crespi Hardt, to $210 from $200. Canaccord Genuity says the results "allay fears of dreaded slowdown," and Jefferies sees CRM as "well positioned to achieve its long-term financial goals."

The bull notes come as a little bit of a surprise, considering the overwhelming analyst attention surrounding the security prior to today. There are 29 brokerages covering CRM, and 28 rate it a "strong buy," while the consensus 12-month price target of $186.28 is a 11.2% premium to last night's closing perch at $167.53.

This is pacing to be CRM's biggest single-session gain since Dec. 26, and puts the stock on track for its best weekly win of 2019. Since an Aug. 2 bear gap, the shares had consolidated below their 320-day moving average. Today, this trendline has been toppled and that bear gap has effectively been filled.

In the options pits, calls have been all the rage. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Salesforce.com's 10-day call/put volume ratio of 2.52 not only indicates calls have more than doubled puts in the last two weeks, but the ratio ranks in the 90th annual percentile, meaning calls have been bought to open over puts at an accelerated clip.

So far today, CRM's options pits have exploded. Around 63,000 calls have already changed hands, nine times the normal amount and three times the number of puts traded. Leading the charge today is the expiring weekly 8/23 160-strike call, but there are also new positions being opened at the weekly 8/30 160-strike call.

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