Salesforce Options Bulls Brush Off Pre-Earnings Bear Note
Salesforce.com, Inc. (NYSE:CRM) was just taken off J.P. Morgan Securities' Analyst Focus list, right before the cloud concern unveils its first-quarter earnings after the close tomorrow, June 4. The analyst maintained its "outperform" rating and $180 price target, but warned software valuations were nearing a 15-year peak. The shares are down 2.8% at $147.17, at last check, pacing for their lowest close since late January.
Despite today's note, analysts have been resoundingly optimistic on the stock, with all but one of the 28 brokerages following CRM calling it a "strong buy." Plus, the consensus 12-month target price represents an untouched region for the equity, sitting all the way up at $182.08.
Looking at the charts, CRM stock spent the second half of May trading neatly between the $151 and $167 levels prior to today. Now, the stock is down roughly 12% from its late-April peak at $167.56. Plus, the security just dipped beneath its 200-day moving average for the first time since early January.
Options bulls appear to be keeping the faith, with roughly 34,000 calls crossing the tape so far, about four times the average intraday volume. The September 155 and 150 calls are the most popular, with new positions being opened at the latter. Trade-Alert suggests a possible roll down to the 150 strike or the initiation of a bull call spread, with either strategy representing expectations for upside by September options expiration.
Circling back to CRM's impending earnings report, the equity has been positive one day after earnings during half of the past eight quarters. That being said, the options market is pricing in a much bigger move for Wednesday's trading, with the stock's implied earnings deviation last seen at 9.7%, compared to its 2.5% average next-day move over the last two years, regardless of direction.
