Will salesforce.com Soar Again This Week?

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Shares of salesforce.com (NYS: CRM) are down nearly 13% over the past month, falling in response to concerns expressed by analysts and Cisco (NAS: CSCO) chief executive John Chambers that big-ticket demand for infrastructure hardware, software, and services is slowing.

Specifically, Chambers warned of "cautious IT spending, especially in enterprise accounts." Around the same time, analysts at William Blair warned that its own checks suggest Salesforce's efforts to win U.S. business haven't been as successful as hoped during the quarter.

And were analysts hoping for? Here's a closer look:

Metric

Fiscal Q1 2013 (Est.)

Fiscal Q1 2012 Actual

Growth (Est.)

Revenue$678.15 million$504.36 million34.5%
Adjusted earnings per share$0.34$0.2821.4%

Source: Yahoo! Finance.

The estimates are worth paying attention to, if only because Wall Street has a decent record when it comes to projecting salesforce.com's earnings:

Fiscal Quarter

EPS Estimate

EPS Actual

Difference

Q1 2012$0.27$0.283.7%
Q2 2012$0.30$0.300%
Q3 2012$0.31$0.349.7%
Q4 2012$0.40$0.437.5%

Source: Yahoo! Finance.

As I see it, there are three things working in favor of a healthy pop in the shares of salesforce.com during Friday's post-earnings trading session:

  1. Sellers have already come and gone. Cisco and William Blair gave nervous traders all the ammo they needed to sell and move on. Meanwhile, lower expectations mean anything other than a big miss should keep the stock about where it is now, while a large beat -- with "large" defined as the sort of 7% to 9% upside surprise we've seen in each of the past two quarters -- would probably kick off an 8% to 10% rally.
  2. Cloud enthusiasm hasn't waned. Look at SAP (NYS: SAP) . At its Sapphire conference in Orlando, Fla., this week, the German software maker is talking up a cloud-centric strategy led by former SuccessFactors chief executive Lars Dalgaard. In December, SAP announced a $3.4 billion deal to acquire the online HR software supplier, which had been a salesforce.com peer.
  3. The mystery nine-figure deal. As good as fourth-quarter results were -- revenue improved 38% as cash from operations ballooned 45% -- they didn't include the impact of the company's first nine-figure deal, which closed during Q1. An unnamed insurance company is responsible for the purchase, CEO Marc Benioff said during the Q4 earnings call.

Taken together, these three factors should lead salesforce.com higher this week. Think I'm wrong? Is salesforce.com too risky a stock for your portfolio? Fair enough. There are plenty more options for safe growth, including these nine rock-solid dividend payers.

At the time this article was published Fool contributorTim Beyersis a member of theMotley Fool Rule Breakersstock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of salesforce.com at the time of publication. Check out Tim'sWeb home,portfolio holdings, andFoolish writings, or connect with him onGoogle+or Twitter, where he goes by@milehighfool. You can also get his insightsdelivered directly to your RSS reader.The Motley Fool owns shares of salesforce.com and Cisco Systems.Motley Fool newsletter serviceshave recommended buying shares of salesforce.com and creating a bear put spread position in salesforce.com. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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