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Is Salesforce Stock Still a Buy After Latest Rally and Dow Listing?

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Salesforce stock is going up. Yesterday, Salesforce stock rallied over 26 percent to an all-time high of $277.97. The stock rose after the enterprise software company reported strong second-quarter fiscal 2021 (quarter ended July 31) earnings results. This year, it has rallied more than 67 percent thanks to investors’ appetite for technology sector stocks. Should you buy Salesforce stock now?

Why is Salesforce stock rising

Salesforce stock price has almost tripled in the last three years. In August 2017, Salesforce stock hovered around $90 per share. It recently surpassed $270 per share. Salesforce’s annual revenue, which was $10.5 billion in fiscal 2018, may reach $20.8 billion in fiscal 2021. Salesforce’s consistent double-digit sales growth rate and meeting or beating Wall Street’s expectations have provided an upward momentum to its stock price.

Salesforce stock rose 26 percent on Wednesday and 30 percent so far this week. The company’s market value surged by $55 billion since the end of last week. On Wednesday, Salesforce stock closed at $272.32 after an intraday all-time high of $277.97. The stock rose after the company delivered blockbuster second-quarter fiscal 2021 earnings results.

Is Salesforce Stock a Buy?
Source: Pixabay

In the second quarter of fiscal 2021, Salesforce reported adjusted EPS of $1.44, compared with $0.66 in the second quarter of fiscal 2020. The adjusted EPS beat analysts’ consensus estimate of $0.67. Salesforce generated sales of $5.15 billion in the second quarter of fiscal 2021, 28.9 percent more than it did in the second quarter of fiscal 2019. It was the first time in the history of the company that it generated quarterly sales of more than $5 billion. The company beat analysts’ consensus sales estimate of $4.9 billion.

Salesforce stock also rose after the company raised its guidance for the full-year fiscal 2021. For fiscal 2021, the company now expects revenue and adjusted EPS of $20.7 billion–$20.8 billion and $3.72–$3.74, respectively. Wall Street had earlier expected revenue and adjusted EPS of $20.0 billion and $2.97, respectively.

Salesforce Dow listing

On Monday, the S&P Dow Jones Indices announced that Salesforce would become one of its 30 components, in effect on August 31. The cloud computing company Salesforce will replace the oil and gas company Exxon Mobil.

Salesforce replacement is due to Apple’s 4-for-1 stock split. The stock split would reduce the index’s technology sector weightage to 20.3 percent from 27.6 percent. To compensate, the technology company Salesforce was added to the Dow and Exxon Mobil was dropped. Additionally, Amgen will replace Pfizer, while Honeywell will replace Raytheon Technologies.

Salesforce stock price history

In 2017, Salesforce’s stock price increased by more than 50 percent. From that point forward, Salesforce stock rose to about $135 by late 2018. In 2019, Salesforce returned about 20 percent. Salesforce reached $185 in February 2020 before pulling back sharply to as low as $130 in March 2020. Much of the weakness was tied to the coronavirus pandemic and the economic turmoil. However, the stock rose to new highs later in 2020 and made it as high as $270 in August 2020 reversing the coronavirus impact.

In 2013, Salesforce had announced a four-to-1 stock split. It means that for each share of Salesforce owned before the split, the shareholder now owned four shares.

What is Salesforce's price forecast?

Currently, the consensus Salesforce stock price forecast is $265.92, which suggests about a 2.4 percent downside potential from the current level. Salesforce stock has a peak target price of $344, which suggests a 26.3 percent upside potential. The stock has a $150.00 base target price, which suggests a 44.9 percent downside potential.

Of the 27 Wall Sreet analysts’ who track Salesforce, 38 have buy recommendations, three have hold recommendations, and one has a sell recommendation.

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