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Salesforce growth accelerates as company offers strong guidance for coming fiscal year

Salesforce’s revenue growth accelerated as the enterprise software company lapped the quarter when the coronavirus began circulating in the U.S.

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Marc Benioff, CEO of Salesforce.

Adam Jeffery | CNBC

Salesforce shares rose 5% in extended trading on Thursday after the cloud software maker issued earnings and guidance that surpassed analysts’ expectations.

Here’s how the company did:

  • Earnings: $1.21 per share, adjusted, vs. 88 cents per share as expected by analysts, according to Refinitiv.
  • Revenue: $5.96 billion, vs. $5.89 billion as expected by analysts, according to Refinitiv.

Revenue grew 23% year over year in the fiscal first quarter, which ended April 30, the company said in a statement. In the previous quarter revenue increased by 20%.

The company will hold its major Dreamforce conference in person in San Francisco as well as in New York, Paris and London, CEO Marc Benioff said on a conference call with analysts. All attendees will have to be fully vaccinated, Benioff said. Salesforce held Dreamforce virtually in 2020 to reduce spread of the coronavirus.

The Platform and Other segment that includes the MuleSoft and Tableau products, currently Salesforce’s top segment for subscription and support revenue, contributed $1.75 billion in revenue, up 28%.

Salesforce’s core Sales Cloud product that salespeople use to track business opportunities delivered $1.39 billion in revenue, up 11%.

While different parts of the world have reopened their economies to varying degrees, there wasn’t a single area that was slower than others in the quarter, said Gavin Patterson, Salesforce’s chief revenue officer.

With respect to guidance, Salesforce said it sees 91 cents to 92 cents in adjusted fiscal second-quarter earnings per share on $6.22 billion to $6.23 billion in revenue. Analysts polled by Refinitiv had been looking for 86 cents in adjusted earnings per share and $6.15 billion in revenue.

Salesforce called for $3.79 to $3.81 in adjusted earnings per share in the full 2022 fiscal year, with $25.9 billion to $26.0 billion in revenue, or 22% growth. Consensus among analysts polled by Refinitiv was $3.43 in adjusted earnings per share and $25.76 billion in revenue.

The expected full-year adjusted operating margin widened to 18% from 17.7% as revenue guidance increased by $250 million at the middle of the range. “Our decision to raise fiscal 2022 revenue is reflective of our Q1 performance and our confidence in our ability to execute for the rest of the year,” said Amy Weaver, the company’s finance chief.

The guidance takes into account the assumption that some travel will return, but not anywhere near pre-pandemic levels, Weaver said.

“We’ve simply learned how to work effectively and how to serve our customers effectively without being on a plane every day,” she said.

The full-year guidance includes a contribution of $500 million in revenue from team communication software app Slack, a $27.7 billion acquisition expected to close right at the conclusion of the quarter that ends on July 31. That expected contribution is $100 million lower than Salesforce had predicted in February, because the company has updated its forecast on when the deal will close. The guidance also includes $190 million in revenue from Acumen Solutions, a professional-services company Salesforce acquired in the fiscal first quarter.

Notwithstanding the after-hours move, Salesforce stock is up less than 2% since the start of the year, while the S&P 500 index has risen almost 12% over the same period.

Morgan Stanley analysts upgraded their rating on Salesforce stock to the equivalent of buy from the equivalent of hold earlier this month. “While concerns on M&A appetite and durable margin expansion may linger, leading franchises do not stay cheap for long, particularly amidst the strong demand backdrop we foresee over the next several years,” they wrote.

WATCH: Jim Cramer on Nvidia, Salesforce and Williams-Sonoma

Here’s how the company did:

Source: https://www.cnbc.com/2021/05/27/salesforce-crm-earnings-q1-2022.html

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Big Tech earnings in the week ahead could test stocks’ recent rally

An earnings avalanche is coming in the week ahead that could put the stock market’s latest gains to the test.

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Traders on the floor of the New York Stock Exchange (NYSE) in New York, on Wednesday, Aug. 11, 2021.

Michael Nagle | Bloomberg | Getty Images

An earnings avalanche is coming in the week ahead that could put the stock market’s recent gains to the test.

Apple, Microsoft, Alphabet, Facebook and Amazon — the biggest of big cap tech — are among the 30% of the S&P 500 companies reporting. A third of the Dow also releases results, including Caterpillar, Coca-Cola, Merck, Boeing and McDonald’s.

“Next week is the real test,” RBC head of U.S. equity strategy Lori Calvasina said. “We’re getting a little bit in every sector.”

Of the companies that have already reported, nearly 84% beat estimates. Earnings are so far expected to be up 34.8% over last year, based on actual reports and estimates, according to I/B/E/S data from Refinitiv.

“The tug-of-war in good versus bad earnings reports has landed in favor of the market with the S&P hitting an all-time high [Thursday]. That may run into difficulty next week,” National Securities chief market strategist Art Hogan said. “We may finally be seeing some cracks in the earnings season.”

The S&P 500 and Dow Jones Industrial Average notched fresh records this week, and the indexes have solid gains for the week. The S&P 500 gained 1.6% to 4,544, while the Dow ended the week up 1.1% at 35,677, the first record close since Aug. 16. Some strategists view the return to those highs as a signal the market is on track for a year-end rally.

The Nasdaq Composite was also 1.3% higher for the week, but it was down 0.8% on Friday as tech stocks declined.

“I think we’re going to learn a lot from this reporting season,” Calvasina said. “So far, so good. Better than feared, with no change to underlying demand. Companies are still managing through for the most part. Investors are punishing companies that aren’t, but they’re not punishing the whole market. The market seems very rational right now.”

For instance, Intel shares were pummeled, falling more than 11.6% on Friday, after the company’s sales missed expectations. Intel warned an industry-wide component shortage hurt its PC chip business. But other semiconductor stocks did not get pulled down in the decline. The VanEck Semiconductor ETF was down about 0.8%.

But Snap sent an industry-wide warning Thursday when its quarterly revenues missed expectations. The company reported that Apple’s privacy changes introduced earlier this year affected its advertising business. The company also said that advertisers were holding back due to supply chain disruptions and labor shortages.

Facebook’s earnings on Monday will be closely watched for any similar comments, as will reports from Alphabet and Twitter Tuesday. The three stocks fell Friday as Snap plunged 26.6%. Facebook lost more than 5%.

“Facebook has been the more broken name. It had the Instagram problem. It had the kid problem. It’s had a hard time going up post-earnings. It will be interesting to see if all these problems are priced in or does it go even lower,” T3Live.com chief strategic officer Scott Redler said.

Redler said the Snap news was a big surprise, since traders viewed social media as immune to supply chain problems. Even though social media was under pressure as a whole Friday, he said stocks have been able to diverge within sectors recently.

Tesla was able to make a new high, and Netflix is at an all-time high. Every group has winners and losers, but overall the participation is better than it’s been in a while. Five stocks aren’t driving the S&P to the all-time highs,” he said. “It’s a bunch of stocks in every sector.”

Traders are now watching the Russell 2000, since a breakout in small caps would be a positive for the overall market, he said. Redler trades the the iShares Russell 2000 ETF (IWM) which closed slightly lower at $227.41 Friday. “If the IWM gets above the $230 to $234 area, it could be a signal for more risk on at the end of the year,” he said.

Redler said the market could be challenged in the coming week. “You just had a big 10-day move up. You would think there will be some digestion,” he said. “I don’t want to chase the market here. It feels like we could rest a little bit next week. If it could digest here, and we could get some individual stock movement, that would be healthier than the pain trade, which is straight up.”

There are a few important economic reports in the week ahead, including durable goods Wednesday; third-quarter GDP Thursday and personal consumption expenditures Friday. Friday’s data includes the PCE deflator, the preferred inflation gauge watched by the Federal Reserve.

Higher interest rates

The closely watched 10-year Treasury yield continued to edge higher in the past week, touching 1.70% before falling to 1.64% Friday. Market pros are watching to see if the yield will reach 1.74%, the closing high from March, and whether it will begin to worry stock investors. The 10-year yield hit this year’s intraday high of 1.776% on March 30.

“I would say over the next week or two, it’s possible we test it, but I would be a little surprised at this stage if it sustainably breaks through,” NatWest Markets’ John Briggs said. He noted that yields have been moving higher, as investors now anticipate the Federal Reserve could raise interest rates next year and as the market anticipates more inflation.

“I get a sense that people are more interested in buying here rather than selling,” he said. Bond yields move inversely to price. It could be a busy week in the market, as investors adjust for the end of the month

Briggs notes the front end, or the 2-year note yield, has moved faster than the longer end. He said that reflects the market’s increased expectation for rate hikes next year, with two hikes expected by the market in the second half of the year.

Week ahead calendar

Monday

Earnings: Facebook, Restaurant Brands, Otis Worldwide, Kimberly-Clark, Owens-Illinois, HSBC, TrueBlue

Tuesday

Earnings: Alphabet, Microsoft, Visa, Advanced Micro Devices, Texas Instruments, Twitter, Chubb, 3M, General Electric, Robinhood, Eli Lilly, UPS, Novartis, JetBlue, Lockheed Martin, Raytheon, Archer Daniels Midland, Sherwin-Williams, Invesco, Hasbro, Boston Properties, Teradyne, Fortune Brands, Hawaiian Holdings, NCR, Boyd Gaming

9:00 a.m. S&P/Case-Shiller home prices

9:00 a.m. FHFA home prices

10:00 a.m. New home sales

10:00 a.m. Consumer confidence

Wednesday

Earnings: Coca-Cola, McDonald’s, Boeing, General Motors, Ford, Bristol-Myers Squibb, Kraft Heinz, Norfolk Southern, Glaxo SmithKline, General Dynamics, Brink’s, Automatic Data, CME Group, International Paper, Penske Auto Group, eBay, Cognizant, Extra Space Storage, KLA Corp, Aflac, Harley-Davidson, Flex, Suncor, BioMarin, Community Health Systems, iRobot

8:30 a.m. Durable goods

8:30 a.m. Advance economic indicators

Thursday

Earnings: Apple, Amazon, Caterpillar, Comcast, Merck, Northrop Grumman, Altria, Intercontinental Exchange, Sirius XM, Yum Brands, American Tower, Gilead Sciences, Starbucks, Molson Coors, T. Rowe Price, Airbus, Anheuser-Busch InBev, Sanofi, STMicroelectronics, Volkswagen, Royal Dutch Shell, Stanley Black & Decker, AllianceBernstein, Check Point Software, Brunswick, Oshkosh

8:30 a.m. Jobless claims

8:30 a.m. Q3 advance real GDP

10:00 a.m. Pending home sales

Friday

Earnings: Chevron, AbbVie, Colgate-Palmolive, Lazard, Booz Allen Hamilton, Weyerhaeuser, Church and Dwight, CBOE Global Markets, Newell Brands, W.W. Grainger, Cerner, Aon, Charter Communications, Phillips 66, Daimler, Nomura, Eni, BNP Paribas

8:30 a.m. Personal income/spending

8:30 a.m. Q3 employment cost index

9:45 a.m. Chicago PMI

10:00 a.m. Consumer sentiment

Source: https://www.cnbc.com/2021/10/22/earnings-alphabet-apple-results-could-test-stocks-recent-rally.html

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China Evergrande set to avert default as property developer reportedly pays off bond interest

Evergrande has remitted the funds for a key interest payment that was due Sept. 23.

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A housing complex by Chinese property developer Evergrande in Beijing. The indebted Evergrande has remitted the funds for a key interest payment that was due Sept. 23 — ahead of a 30-day grace period, Chinese state media Securities Times reported.

Noel Celis | AFP | Getty Images

Evergrande has remitted the funds for a key interest payment that was due Sept. 23 — ahead of a 30-day grace period that ends Saturday, Chinese state media Securities Times said Friday.

That will allow the indebted Chinese property developer to stave off a widely-expected default.

Shares of Evergrande popped more than 4% on that news.

The $83.5 interest payment that was due Sept. 23 on Evergrande’s March 2022 offshore bond has been closely watched since the heavily indebted property developer warned twice in September that it may default. Although the company missed the Sept. 23 deadline, it has a 30-day grace period before formally defaulting. U.S. dollar bonds are largely held by foreign investors.

The Securities Times report said Evergrande plans to make the interest payment in time for the Oct. 23 deadline, and that the embattled property developer had remitted the $83.5 million through Citibank. The bank declined CNBC’s request for comment.

The world’s most indebted property developer is buckling under the weight of more than $300 billion in debt, and has been struggling to raise funds to pay suppliers and investors.

CNBC has reached out to Evergrande for comment. Evergrande missed four other coupon payments in September and October. There are other interest payments on its U.S. dollar bonds due in November and December.

In total, Evergrande has missed payments of at least $279 million since last month, according to Reuters —this figure would include the Sept. 23 payment.

Jim Veneau, head of Asian fixed income at AXA Investment Managers, called the latest development on Evergrande a “surprise.”

“It’s definitely a surprise, but a positive surprise,” Veneau told CNBC’s “Street Signs Asia” following the news. “The key with Evergrande’s payment this morning is, at least it shows a willingness to make the payment.”

But, he added: “I wouldn’t call it a game changer, it’s more like a hopefully momentum changer.”

Evergrande contagion fears

Worries over its huge debt have roiled global markets, amid concerns about a potential spillover into the rest of China’s real estate industry or economy.

Markets had widely expected Evergrande to default on the interest payments, as analysts said domestic investors would be prioritized over foreign investors.

However, last week, China’s central bank said property firms that have issued bonds overseas — referred to as offshore bonds — should actively fulfil their debt repayment obligations.

But Evergrande encountered a setback this week, when a deal to sell off some of its assets and bring in much-needed funds fell through.

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It was in talks earlier this month to sell a 50.1% stake in Evergrande Property Services, its services unit, to a smaller rival Hopson Development Holdings. But Hopson announced Wednesday that the deal — which would have been worth 20.04 billion Hong Kong dollars ($2.58 billion) — fell through.

Debt problems in China’s real estate sector has spread beyond Evergrande, said Veneau of AXA Investment Managers. He pointed to defaults by other Chinese property developers Fantasia and Modernland.

“So with those two events, the market then had some serious considerations over whether all of the weak companies would — even if they were showing high cash to short term debt (ratio) — would they make their coupon payments, would they repay their maturities,” he said.

“So that’s the question that had been put into doubt.”

More developers have been facing the threat of default, with ratings agencies issuing a series of downgrades on property firms in China.

China’s ‘three red lines’

Evergrande’s problems came to a head after the authorities rolled out the “three red lines” policy last year. That policy places a limit on debt in relation to a firm’s cash flows, assets and capital levels. That started to rein in developers after years of growth fueled by excessive debt.

In the last few years, Chinese developers have increasingly taken on debt, particularly in overseas markets.

Between 2016 and 2020, the industry’s value of offshore U.S. dollar bonds grew by 900 billion yuan ($139.75 billion) — nearly two times the growth of 500 billion yuan in onshore yuan bonds, according to Nomura.

Evergrande was by far the leader in overseas debt issuance, accounting for six of the 10 largest offshore U.S. dollar-denominated bond deals by Chinese real estate companies between 2016 and 2021, according to Dealogic.

As of the first half of this year, Evergrande held 19% of U.S. dollar-denominated high yield bonds among Chinese real estate companies — the largest share, worth $19.24 billion, according to Natixis.

Shares of Evergrande popped more than 4% on that news.

Source: https://www.cnbc.com/2021/10/22/evergrande-has-made-83point5-million-bond-interest-payment-chinese-media.html

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‘Squid Game’ has been watched by two-thirds of all Netflix users but hasn’t moved the needle on U.S. subscribers

Netflix added just 70,000 subscribers from the U.S. and Canada in the third quarter and less than 1 million in the last 12 months.

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Scene from “Squid Game” by Netflix

Source: Netflix

It may seem like every American you know has watched “Squid Game,” but the show’s popularity has not yet created a surge of new Netflix subscribers in the U.S.

Netflix revealed in its shareholder letter Tuesday that 142 million of its subscribers have seen at least two minutes of the wildly popular South Korean drama. That’s exactly two-thirds of the company’s 213 million global customers.

But while the streaming service gained 4.4 million net subscribers in the third quarter, topping average analyst estimates of 3.5 million, the growth didn’t come from the U.S. or Canada. The company added just 70,000 users from the region in the quarter.

While it’s possible Netflix may have added more American or Canadian subscribers resulting from “Squid Game” in the fourth quarter, which began Oct. 1, the company didn’t alter its preexisting 8.5 million global forecast for the period.

It’s becoming clear that Netflix’s growth has stalled in the U.S. and Canada, where it has added fewer than 1 million subscribers in the past 12 months. That’s part of the reason the company is beginning to dabble in video games. It will be interesting to see if Netflix does anything surprising in the coming months to jump-start growth in the U.S. and Canada, or if it’s content with its growth plateau in the region as long as it’s still charging ahead internationally.

Netflix’s 74 million U.S. and Canada subscriber base also serves as a de facto ceiling for its streaming competition. Netflix still dominates Disney+, Hulu, AT&T‘s HBO Max, NBCUniversal‘s Peacock and other, newer streaming services in terms of overall subscribers.

Cowen & Co. published survey results earlier this month in a note to clients that showed 25% of respondents said they used Netflix more than any other video service — including standard cable and broadcast TV. That dwarfed other subscription streaming services. Amazon Prime Video was the next highest at 7.3%.

If “Squid Game” can’t bring in millions of new subscribers, it’s fair to wonder if any new content can truly move the needle in the region.

Disclosure: Comcast’s NBCUniversal is the parent company of both CNBC and the Peacock streaming service.

Netflix revealed in its shareholder letter Tuesday that 142 million of its subscribers have seen at least two minutes of the wildly popular South Korean drama. That’s exactly two-thirds of the company’s 213 million global customers.

Source: https://www.cnbc.com/2021/10/19/squid-game-watched-by-two-thirds-of-netflix-users-few-new-us-subs.html

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