Apple's Rally Can't Match the Salesforce Stock Slump

Each week, I endeavor to report the results of the Big Idea Portfolio, a collection of five tech stocks that I believe will crush the market over a three-year period. I've done it before; my last tussle with Mr. Market ended with me beating the index's average return by 13.35%.

Real money was on the line then as it is now, which means any one of the five stocks you see below could tip the scales in my favor. This time, stock sunk 5% Friday after offering subpar guidance the night before.

Wall Street was looking for $0.12 a share in fiscal Q2 earnings on $934.5 million in revenue. Management offered a more conservative target, guiding to $0.11 to $0.12 on $931 to $936 million in revenue. Salesforce stock sold off as a result, but not by as much as I would have expected, given the number of short sellers piling in recently.

Why didn't the bears collect bigger profits last week? Growth might have something do with it. First-quarter revenue improved 28% to $893 million, ahead of estimates. Current-year forecasts call for at least $3.835 billion in sales. All signs point to CEO Marc Benioff's making good on his promise to create a $10 billion company.

Sustainable profits will come, but not until Benioff is done building.

What's the Big Idea this week?
Apple's nearly 3% gain for the week came amid sharp questions about its tax policies and were no match for the Salesforce stock slump. Shares of the cloud computing pioneer fell 11% for the week as the Big Idea Portfolio surrendered 324 basis points to Mr. Market in our three-year contest to see who can do better for investors.

This time, all four indexes fell. The small-cap Russell 2000 led the laggards with a 1.20% decline, followed by the Nasdaq's 1.14% dip, the S&P 500's 1.07% drop, and the Dow's 0.33% slip, according to data supplied by The Wall Street Journal. Here's a closer look at where I stood through Friday's close:


Starting Price*

Recent Price

Total Return









Rackspace Hosting




Riverbed Technology












S&P 500 SPDR








Source: Yahoo! Finance.
* Tracking began at market close on Jan. 6, 2012.
** Adjusted for dividends, splits, and other returns of capital.

Notable newsmakers
Among the other tech stocks making news last week:

  • Tableau Software , one of this year's most exciting new IPOs, burst onto the scene with two straight days of surging stock prices. There's much to like about the business of data visualization, so keep an eye on this stock.

  • Microsoft unveiled Xbox One for combining voice, video chat, gaming, TV, and more into a single console. Anyone think Mr. Softy isn't serious about winning the war for living room? My Foolish colleague Rick Munarriz is right: Apple has work to do.

  • Finally, shares of Pandora Media initially soared and then fell after reporting big gains in revenue and active users. Full year-earnings are now forecast to come in between a $0.02 loss and an $0.08 profit. Wall Street is modeling for just a $0.01-per-share profit, so there could be more upside to be had in the quarters ahead.

What else caught your eye in the tech world last week? Would you buy, sell, or short Salesforce stock now? Let us know what you think in the comments box below.

Five stocks enter, one stock leaves
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Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Apple, Google, Rackspace Hosting, Riverbed Technology, and at the time of publication. Check out Tim's Web home and portfolio holdings, or connect with him on Google+, Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.The Motley Fool recommends Apple, Google, Rackspace Hosting, Riverbed Technology, and and owns shares of Apple, Google, Microsoft, and Riverbed Technology. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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