ADBE - Adobe Inc.
| Previous Close | 264.18 |
| Open | 263.47 |
| Bid | 254.23 x 800 |
| Ask | 259.17 x 800 |
| Day's Range | 259.52 - 264.62 |
| 52 Week Range | 204.95 - 277.61 |
| Volume | 240 |
| Avg. Volume | 3,235,200 |
| Market Cap | 127.018B |
| Beta (3Y Monthly) | 1.05 |
| PE Ratio (TTM) | 48.18 |
| EPS (TTM) | 5.39 |
| Earnings Date | Jun 18, 2019 |
| Forward Dividend & Yield | N/A (N/A) |
| Ex-Dividend Date | 2005-03-24 |
| 1y Target Est | 292.11 |
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Don’t Stress About the Recent Weakness of Adobe Stock
Adobe (NASDAQ:ADBE) stock has dropped over 5% since the visual-cloud giant delivered a mixed first-quarter earnings report in mid-March. The company's first-quarter revenue and profit numbers topped expectations, as its top line surged an impressive 25% year-over-year.Source: Shutterstock But the company's second-quarter revenue and profit guidance came in slightly below expectations. And although it hiked its full-year 2019 profit guidance, it did not change its 2019 revenue guidance. * 5 Cloud Stocks to Help Your Portfolio Fly In other words, ADBE didn't deliver the typical beat-and-raise report to which the owners of Adobe stock have become accustomed. Instead, it reported a beat, but not a clear-cut raise. The owners of ADBE stock weren't too happy, and Adobe stock dropped a few points.InvestorPlace - Stock Market News, Stock Advice & Trading TipsIn the big picture, this post-earnings weakness of Adobe stock is nothing to be concerned about. The company's top-line growth, which came in at 20%-plus, remains healthy and continues to support the thesis that ADBE is growing quickly and gaining share in some exceptionally large markets. Meanwhile, its bottom-line growth was below 10%, which is lower than normal for ADBE. But that was mostly the result of certain one-off margin headwinds which will pass by mid-year.Overall, then, the revenue and margin outlooks supporting ADBE stock remain robust. As long as that remains true, Adobe stock will continue to rise over the long-term. Right now, investors are worried about the valuation of ADBE stock. But those worries will pass once the company's margins start moving higher again. So investors should embrace the recent weakness of Adobe stock, instead of avoiding it. The Numbers Are Really GoodAdobe's numbers are still really good. Importantly, its revenue growth is actually accelerating, not decelerating, and its margins have the runway to rebound in a big way in the second half of the year.The company's revenue growth in Q1 was north of 25%. That is the biggest year-over-year revenue growth rate Adobe has reported since late 2017, or five quarters ago. Meanwhile, its Q2 revenues are expected to rise roughly 23%. But management's guidance is usually conservative. So ADBE's Q2 revenue growth will likely come in around 24%-25% when all is said and done, exceeding the company's growth rate through most of 2018.In other words, Adobe is a 20%-plus revenue growth company with a revenue growth rate that is not only stable above 20%, but actually rising slightly as the company expands. That's impressive. It shows just how dominant this company is in some continuous-growth cloud markets and demonstrates that 20%-plus revenue growth can be counted on for the foreseeable future.Meanwhile, its margins were subpar last quarter, but this pain is temporary and leaves the company well-positioned to increase its margins in the second half of 2019. In the first quarter of 2019, its gross margins fell 1.4 percentage points year-over-year and its operating margins dropped roughly four percentage points. That's not good.But all of the margin pressure was caused by deferred revenue and acquisition headwinds, which will phase out in the second half of 2019. As a result, its margins should improve dramatically through every quarter of 2019. By the second half of the year, its margins should be poised to expand year-over-year. If that occurs, as investors become more confident about its margins, they will buy Adobe stock, putting upward buying pressure on the shares.All in all, despite the stock's recent drop, the company's numbers remain good. As long as its revenue growth remains north of 20% and its margins improve from their depressed first-quarter base, ADBE stock should rebound from this selloff. The Long-Term Outlook of Adobe Stock Is PromisingIn the big picture, Adobe stock is a long-term winner.Adobe is a cloud company. More than that, Adobe is a dominant, big-growth cloud company that is attacking really big, non-cyclical growth markets. Those markets include cloud-based digital document management solutions. which is a $7.5 billion total addressable market, cloud-based photo and video-editing creative solutions, a $30 billion total addressable market, and experience-focused enterprise cloud solutions, which is a $70 billion addressable market.ADBE already dominates two of those markets. The company essentially owns the PDF and digital-documents world. That world will continue to grow over the next several years as everything goes digital. As it does, Adobe's Document Cloud will become more widely adopted.Adobe is also the only reputable player in the creative-solutions space. That space, too, will grow over the next several years as the world becomes more focused on graphics. And as the latter process continues, Adobe's Creative Cloud and Experience Cloud solutions will also become more widely used.Overall, Adobe is positioned to gain share over the next several years in markets that are cumulatively worth $100 billion-plus, and Adobe's revenues this year are expected to be just over $11 billion. Consequently, I think it's reasonable to expect Adobe's top line to rise 15%-20% for the foreseeable future, with gross margins that remain around 90%. Moreover, its spending rates should gradually fall as it grows.If my forecasts prove to be correct, I think Adobe's EPS can reach about $22.50 by fiscal 2025. Based on a forward multiple of 20, which is average for growth companies, that implies a fiscal 2024 price target for Adobe stock of $450. That represents roughly 80% upside in the long-run.If we discount that $450 price target back by 10% per year, we arrive at a fiscal 2019 price target for ADBE stock of $280. That's above where the stock trades today. As a result, ADBE looks well-positioned to rise in the near-term, too. The Bottom Line on ADBE StockThe recent weakness of Adobe stock is nothing to worry about. Adobe's numbers remain good, and its fundamentals remain strong, so the recent weakness of ADBE stock will pass. When that occurs, Adobe stock will resume its long-term climb. Ultimately, that long-term ascent will push ADBE stock towards $450.As of this writing, Luke Lango was long ADBE. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Invincible Stocks Leading The Bull Market Higher * 5 Dow Jones Stocks Coming to Life * 7 of the Best High-Yield Funds for 2019 and Beyond Compare Brokers The post Don't Stress About the Recent Weakness of Adobe Stock appeared first on InvestorPlace.
- InvestorPlace•5 days ago
Why Salesforces Stock Continues to Impress Most Investors
Every once in a while we get a company that wows investors. Salesforce.com (NYSE:CRM) is one of them and Wall Street is in awe of it. The proof is that CRM stock's momentum represents risk appetite in the whole market. It rallies fast and yes, it falls fast, but almost never to any fault of its own.Source: Shutterstock On Mar. 5, when traders were selling out of CRM stock, I wrote about how wrong they were to do that. It has since recovered and is back to near all-time highs. And yesterday, CRM stock was leading the charge before the China headline hit the ticker tape to cause a market wide sell off and stall the run.The results show that for the long term, owning Salesforce stock is a winning proposition. Year-to-date, CRM is up 20% leading all indices. It is up 31% in 12 months and almost 200% in five years.InvestorPlace - Stock Market News, Stock Advice & Trading TipsSo those wanting to invest in CRM for the long term should not worry about timing a perfect entry into CRM stock. It's a momentum stock, so it almost never leaves the door open for a clear entry point. The idea here is to buy high and sell higher much later. * 5 of the Best Stocks to Buy Under $10 Fundamentally, Salesforce stock is not cheap since it sells at a three-digit price-to-earnings ratio. It is more expensive than Amazon (NASDAQ:AMZN), which has been the poster child of expensive stocks. But when a company delivers hyper-growth as CRM and AMZN do, investors should award them a higher valuation. They are supposed to overspend, so they can continue to deliver outstanding growth. How to Approach CRM Stock NowInvestors incorrectly sold CRM stock on softer guidance this month. But I listened to its high profile leader Mr. Benioff, who emphatically said that they will continue to set records on Wall Street, and I believe him.For the short term, momentum stocks like CRM make for good trading vehicles because they move fast in both directions. The key to success here is finding the levels that matter. For that, I use the lower time frame charts.At the end of January, CRM broke out of the $153 neckline and since then, it continues to trade inside a defined range. The breakout neckline was successfully tested twice already so it is short-term support. Anytime Salesforce stock falls to it, I can buy it for a swing trade with tight stops at $5 and $9 below it.There is another mini support level at $159 per share. So if I am long already into a swing trade, I could use this as a stopping point depending on my trade intentions. I expect it to hold as natural support provided the geopolitical headlines or the Fed today don't ruin the run. Click to EnlargeConversely, if the CRM bulls can breakout out of $166 per share they run into open space where there is virtually no resistance. The bears will have a hard time to stop the rally. The target of the breakout is really open to interpretation, so then I'd set trailing stops to lock in the profits and enjoy the ride. Those who know options can then sell calls against their stock to generate synthetic dividends.The bottom line, CRM is an incredible success story for the long term and it presents many short-term trading opportunities. Today, it will also likely represents a leading indicator to the market-wide risk appetite. If CRM is getting bid, then the major indices will also be in the hands of the bulls. Shorting CRM stock long term is the equivalent of shorting markets in general. For now, this will not be my approach to the stock.Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. You can follow him as @racernic on Twitter and Stocktwits. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Invincible Stocks Leading The Bull Market Higher * 5 Dow Jones Stocks Coming to Life * 7 of the Best High-Yield Funds for 2019 and Beyond Compare Brokers The post Why Salesforces Stock Continues to Impress Most Investors appeared first on InvestorPlace.
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7 Invincible Stocks Leading The Bull Market Higher
An object in motion stays in motion until acted upon by an unbalanced forced. Sir Isaac Newton posited that in the 1600's as the first law of motion, and it has since become a fundamental building block of physics.As it happens, Newton's first law of motion also has applications to the stock market. Traders just don't call it the first law of motion. They call it momentum. But, the idea is broadly similar. Stocks that are on an uptrend/downtrend, will stay on an uptrend/downtrend, until some external catalyst reverses the direction of the stock.As such, when looking for stock market winners, it is appropriate to look at the basket of stocks which are already winners. That is, look for stocks that are already on an uptrend, and have a track record of beating the market.InvestorPlace - Stock Market News, Stock Advice & Trading TipsWhen doing so, there are two important things to remember to mitigate risk: longer is better, and bigger is better. The longer the stock's track record of market out-performance, the safer it is to assume the stock will keep outperforming for the foreseeable future. Also, the bigger the stock's market cap, the safer the stock is given its presumably already dominant positioning.With that in mind, I've come up with a list of seven "invincible stocks" that are leading this bull market higher. These are stocks that have consistently generated huge alpha over the past decade, and which have become titans in their industry today. As such, these stocks are proven winners that project as winners for the foreseeable future, too. * The 10 Best Stocks to Buy for the Bull Market's Anniversary Which stocks belong to this list? Let's take a look. Amazon (AMZN)Source: Shutterstock Past Decade Performance (Alpha): 2,360% (over 2,000%)Market Cap: $830 billionPerhaps the godfather of invincible stocks is e-commerce and cloud giant Amazon (NASDAQ:AMZN). There was a point in time where no one really knew if the Amazon e-commerce business model was going to work. That point in time was long ago. Over the past decade, Amazon has increasingly proven the effectiveness of its e-commerce business model, while adding multiple other verticals, leading to Amazon stock generating over 2,000 points of alpha during that stretch.This stock is only going higher. The theme of Amazon over the past decade has been robust revenue growth and rapid market share expansion. Over the next decade, the theme will be robust profit growth and margin expansion, thanks to growth in higher-margin businesses like digital ads and cloud. Both of those themes are really positive. One has already done its work and generated huge alpha. The next is about to.Long story short, Amazon stock is one to buy and hold for the long run. Netflix (NFLX)Source: Vivian D Nguyen via Flickr (Modified)Past Decade Performance (Alpha): 6,280% (over 6,000%)Market Cap: $150 billionRight next to Amazon in the Mount Rushmore for invincible stocks is streaming giant Netflix (NASDAQ:NFLX). Just like many people doubted the e-commerce business model, many people likewise doubted the streaming business model. Those doubters were wrong. Streaming has become the biggest trend in video today, and Netflix has led the way. In doing so, Netflix has generated an amazing 6,000-plus points in alpha over the past decade.This trend of out-performance will continue. In the streaming wars, all that matters is content, since better content drives sub growth and price hikes, which leads to revenue growth, margin expansion, and profit growth. Netflix has already won the content game. It has more reach than any other streamer, so it has more data to produce better content and it can justify spending more money to produce better content, too. Considering no one else will likely get to Netflix's size any time soon, that means Netflix has a huge advantage in streaming that isn't going away any time soon. * The 5 Best ETFs to Buy for a Complete Income Portfolio So long as the ultra-critical content advantage doesn't go away, Netflix stock will remain on an uptrend. Salesforce (CRM)Source: Shutterstock Past Decade Performance (Alpha): 1,860% (over 1,500%)Market Cap: $125 billionOne of the biggest themes in the business world over the past several years has been the migration of enterprise processes from on-premise to the cloud, and the company leading that secular transition has been Salesforce (NYSE:CRM). Over the past decade, the cloud has gone from niche to mainstream, as enterprises have increasingly realized its cost and convenience benefits. When these enterprises turned to the cloud, the first company greeting them was Salesforce, and that's largely why CRM stock has generated over 1,500 points of alpha over the past decade.The stock will continue to be a big winner for the next several years. This is a high-growth, high-margin company that is both supported by secular trends and attacking some very large markets. The valuation underlying CRM stock is rich. But, that's always the case for big growth stocks, and those big growth stocks always grow into those rich valuations so long as the growth trajectory remains healthy. It will for CRM stock, mostly because the cloud and data revolutions are still in their early innings (only about 20% of enterprise workloads have migrated to the cloud).All in all, because of its leadership position in a market that projects to be a big grower for a lot longer, CRM stock likewise projects to a big winner for a lot longer. Adobe (ADBE)Source: Shutterstock Past Decade Performance (Alpha): 1,330% (over 1,000%)Market Cap: $130 billionAnother cloud giant that has won big over the past several years is Adobe (NASDAQ:ADBE). Over the past decade, Adobe has gradually shifted its business model from one-off, on-prem sales to recurring, cloud subscriptions and in so doing, it has significantly improved revenue predictability and profitability. It has also expanded its business to include enterprise-level cloud solutions. This combination of tailwinds has led to ADBE stock generating over 1,000 points of alpha over the past ten years.Adobe stock will generate big alpha over the next ten years, too. At its core, this company is the visual cloud leader. That is, it dominates in delivering cloud solutions focused on storing, organizing, analyzing and creating visual-heavy experiences. The world is pivoting towards both producing and consuming these visual-heavy experiences in greater volume, perhaps most broadly evidenced by the rise of photo and video sharing apps like Instagram. As this pivot continues to play out, the visual cloud will only become more important to enterprises, and Adobe will only win over more customers. * 7 Financial Stocks to Invest In Today As they do, the stock will keep heading higher in a long-term window. Nike (NKE)Source: rodrigofranca via FlickrPast Decade Performance (Alpha): 680% (410%)Market Cap: $136 billionThe only non-tech stock on this list is athletic apparel giant Nike (NYSE:NKE), and that's because Nike's sustained dominance in the athletic apparel market is largely unmatched in any other non-tech industry. It seems like that ever since the mid-1990's and Michael Jordan, Nike has been top dog in the athletic apparel market. Impressively, over the past ten years, that dominance has only grown, as the company has continued to attract the best athletes, create the best shoes, roll out the best marketing and do all three of those things far more quickly than peers. Consequently, Nike stock has generated an impressive 410 points of alpha over the past decade.There were signs that the Nike stock uptrend was going to end in 2017. That was just a head fake. Nike fell asleep at the wheel. Competition gained ground. The sleeping giant woke up. Nike doubled down on innovation, speed to market and marketing. They've since crushed the competition, and are now as dominant as they've ever been in the athletic apparel market. This example proves that Nike is king in this market and that the company will remain king so long as management keeps executing.They've been executing almost flawlessly for over twenty years now. There's no reason to believe that, after already squashing threats in 2017, this great execution won't continue. As such, Nike stock will remain a long-term winner. Alphabet (GOOGL)Source: Shutterstock Past Decade Performance (Alpha): 635% (365%)Market Cap: $830 billionWhat is the internet without search? Nothing. That's exactly why, as global internet penetration rates have more than doubled over the past ten years, global digital search giant Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) has turned into a global utility. Internet consumers don't just want Google. They need it. This need has been the fuel for GOOGL stock's 365 points of alpha over the past decade.Because the internet is still growing, Alphabet will continue to grow, too. The global internet penetration rate is still just over 55%, and that rate is growing by several points every year. Thus, within the next decade, we are likely to see 70%, 75% and even 80%-plus internet penetration rates. As the global digital economy grows from a 55% penetration rate to a 70%-plus penetration rate, the number of users on Alphabet's suite of platforms (most notably, Google and YouTube) will continue to rise. As will ad dollars and profits. There's also the cloud, AI and self-driving businesses, which in it of themselves are big-growth businesses oozing with long-term potential. * 5 of the Best Stocks to Buy Under $10 In other words, the Alphabet growth narrative is far from over. That means the uptrend in GOOG stock is also far from over. Intuitive Surgical (ISRG)Source: Jon Fingas via Flickr (Modified)Past Decade Performance (Alpha): 1,530% (over 1,000%)Market Cap: $65 billionAnother major secular growth trend during the 2010's was automation, and one major company at the heart of this trend has been Intuitive Surgical (NASDAQ:ISRG). Intuitive Surgical creates robots called da Vinci that assist with medical surgeries and procedures. As the automation trend has made its way into the medical world, adoption of da Vinci robots has skyrocketed. This surging adoption has led to a 1,500%-plus rally in ISRG stock over the past decade.The exciting part of Intuitive Surgical is that this medical robot growth narrative is still in its early innings. There are over 400,000 operating rooms in the world. Only around 5,000 have a da Vinci operating system. That means there's lots of room for da Vinci to grow globally as the automation wave becomes more broadly adopted in the medical sector.The implication for ISRG stock? Sustained big growth over the next several years will keep ISRG stock on a winning path.As of this writing, Luke Lango was long AMZN, NFLX, ADBE, NKE and GOOG. 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Here’s Why Chipotle Stock Will Plummet on Any Negative Headline
Make no mistake about it. Chipotle (NYSE:CMG) is finally back. The E. coli outbreak which hit the chain hard in 2015 is now in the rear-view mirror. The company is using new marketing, menu innovations and an expanded digital presence to drive a long overdue recovery in traffic, sales and margins. In response, CMG stock has rallied from $250 in February 2018, to $660 a little over a year later.Source: Shutterstock Some bulls think this monster rally will continue. Piper Jaffray recently lifted its price target on CMG stock to $725, citing international expansion potential as a reason to buy Chipotle stock. But fundamentals say that this big Chipotle stock rally is on its last legs. To be sure, the fundamentals at Chipotle are improving. Unique marketing campaigns, healthy food menu innovations, and digital business expansions are driving robust and sustainable comparable sales and traffic growth. That's pushing margins higher. Plus, the company still has a ton of runway left on the unit expansion front (only 2,500 stores).But all of those positives are already priced into CMG stock. This is a $650 stock with a fiscal 2019 earnings estimate of $12.30 per share. That means Chipotle stock is trading at over 50x forward earnings. The average forward multiple in the restaurant sector is under 25. Thus, CMG stock is trading at more than double the valuation of its peers.InvestorPlace - Stock Market News, Stock Advice & Trading TipsEven for a company with as big of growth potential as Chipotle, that relative valuation gap is just too large. It will eventually narrow, and in a big way, meaning that Chipotle stock is due for a sizable correction in the near future. The Fundamentals Are ImprovingThe Chipotle turnaround is very real and very impressive.Long story short, Chipotle brought in new CEO Brian Niccol about a year ago, and he's done nothing short of a spectacular job turning around what was a sinking ship. Before Niccol, Chipotle was a company struggling with its brand image, which had no real growth drivers in the aftermath of a crippling late 2015 E. coli outbreak.Since Niccol took over, all that has changed. Chipotle has re-branded itself as a healthy QSR chain with real ingredients through its new 'For Real' marketing campaign. To coincide with that marketing campaign, Chipotle has also expanded its menu to include things like lifestyle bowls, which cater to the ingredient-sensitive consumer. Meanwhile, Chipotle has also significantly expanded its presence on digital food-ordering apps.These three initiatives have worked wonders for Chipotle. Traffic growth has turned healthily positive for the first time since late 2015. Comparable sales growth is running around 10%-plus. Digital sales growth was above 65% last quarter. Restaurant level operating margins are moving consistently higher.In other words, the Chipotle turnaround is here. It won't end any time soon. As such, the fundamentals underlying CMG stock project to remain favorable for a lot longer. The Valuation Makes No SenseAt current levels, favorable long-term growth fundamentals won't cut it for CMG stock. It's already priced for favorable long-term growth, and then some.This is a restaurant stock trading at over 50x forward earnings. The whole market trades at 16x forward earnings. Restaurant stocks trade at 23x forward earnings. High growth application software stocks trade at 35 forward earnings. Indeed, on a forward earnings basis, CMG stock is more expensive than Facebook (NASDAQ:FB), Alphabet (NASDAQ:GOOG), Twitter (NYSE:TWTR), Adobe (NASDAQ:ADBE), Alibaba (NYSE:BABA), and Intuitive Surgical (NASDAQ:ISRG), all 20%-plus revenue-growth tech companies with sky high margins and big moats. It's also nearly as expensive as Amazon (NASDAQ:AMZN) and Salesforce (NYSE:CRM), two huge revenue-growth companies with tremendous margin expansion potential.That doesn't make much sense to me. Again, CMG is a restaurant stock. With a sub-10% revenue growth rate. In a competitive fast casual restaurant industry. And margins that, while heading higher, don't have that much more room to expand.Here's my math on Chipotle stock. Mid-single-digit comparable sales growth will likely slow going forward as the lap gets tougher. But comps will remain in the low single-digit range thanks to menu innovations and digital business expansion. Sustained mid-single-digit unit growth should drive high-single-digit revenue growth. Restaurant level margins should continue to rise, but flatten out short of their mid-2010's highs due to higher labor costs. G&A and D&A expense rates should fall with scale.Putting all together, I optimistically see Chipotle as a 20% earnings grower over the next several years, with potential to hit $35 in EPS by fiscal 2025. Based on a slightly above restaurant-average 25x forward multiple, that equates to a fiscal 2024 price target for CMG stock of $875. Discounted back by 10% per year, that equates to fiscal 2019 price target below $550.Chipotle stock trades above $650 today. As such, this stock is simply overvalued at the present moment. * Top 7 Service Sector Stocks That Will Pay You to Own Them Bottom Line on CMG StockThe Chipotle turnaround is here, and it's not going anywhere anytime soon. But CMG stock has already had its big run-up in anticipation of this recovery. At current levels, the stock is overvalued. As such, the next time this company fumbles, the stock could drop in a big way, and in the restaurant industry, fumbles happen all the time.As of this writing, Luke Lango was long FB, GOOG, TWTR, ADBE, AMZN, and CRM. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Financial Stocks to Invest In Today * 7 Single-Digit P/E Stocks With Massive Upside * 5 Chip Stocks on the Rise Compare Brokers The post Here's Why Chipotle Stock Will Plummet on Any Negative Headline appeared first on InvestorPlace.
- Markit•6 days ago
See what the IHS Markit Score report has to say about Adobe Inc.
Adobe Inc NASDAQ/NGS:ADBEView full report here! Summary * ETFs holding this stock are seeing positive inflows * Bearish sentiment is low * Economic output in this company's sector is expanding Bearish sentimentShort interest | PositiveShort interest is extremely low for ADBE with fewer than 1% of shares on loan. This could indicate that investors who seek to profit from falling equity prices are not currently targeting ADBE. Money flowETF/Index ownership | PositiveETF activity is positive. Over the last month, ETFs holding ADBE are favorable, with net inflows of $12.72 billion. Additionally, the rate of inflows is increasing. Economic sentimentPMI by IHS Markit | PositiveAccording to the latest IHS Markit Purchasing Managers' Index (PMI) data, output in the Technology sector is rising. The rate of growth is weak relative to the trend shown over the past year, but is accelerating. Credit worthinessCredit default swapCDS data is not available for this security.Please send all inquiries related to the report to score@ihsmarkit.com.Charts and report PDFs will only be available for 30 days after publishing.This document has been produced for information purposes only and is not to be relied upon or as construed as investment advice. To the fullest extent permitted by law, IHS Markit disclaims any responsibility or liability, whether in contract, tort (including, without limitation, negligence), equity or otherwise, for any loss or damage arising from any reliance on or the use of this material in any way. Please view the full legal disclaimer and methodology information on pages 2-3 of the full report.
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Why Nike and Adobe Stock Could Benefit From a Fed Pivot on Inflation
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- Thomson Reuters StreetEvents•6 days ago
Edited Transcript of ADBE earnings conference call or presentation 14-Mar-19 9:00pm GMT
Q1 2019 Adobe Inc Earnings Call
- InvestorPlace•7 days ago
Keep a Close Eye on Salesforce Stock
Recently, I've become increasingly convinced that Salesforce.com (NYSE:CRM) is an important barometer for the tech sector as a whole. CRM stock price isn't the only gauge investors need to watch, But Salesforce stock still seems to provide a pure look at investors' preferences.Source: Shutterstock The key reason why is that Salesforce.com 's story is reasonably simple. It has a fantastic business. No one can dispute that. As CEO Marc Benioff pointed out on its Q4 conference call earlier this month, the company was the fastest enterprise software company ever to reach $13 billion in sales. (The company celebrated its 20th anniversary on Mar. 8) Its revenue growth has been almost bizarrely consistent for years now, hovering generally in the 24%-26% range. * 7 Small-Cap Stocks That Make the Grade And there really aren't any external factors that can materially change its outlook. Microsoft (NASDAQ:MSFT) and Adobe (NASDAQ:ADBE) are trying to compete in customer relationship management, or CRM, software, but the dominance of Salesforce.com appears assured. A downturn in the macro cycle likely would impact Salesforce stock.InvestorPlace - Stock Market News, Stock Advice & Trading TipsBut given multi-year contracts and the importance of CRM software to businesses, the impact likely would be manageable. (Note that CRM's revenue more than tripled between 2007 and 2011.)Of course, CRM stock price also isn't cheap or close to it. And so Salesforce stock provides an intriguing answer to an interesting question: what, exactly, are investors willing to pay for growth?Coming off the company's fourth-quarter report, it appears investors aren't sure about the answer to that question. Once they figure it out, the rest of the market may as well. Earnings "Surprise" for Salesforce Stock (Yeah, Right)Salesforce's earnings came in nicely ahead of Street estimates on both the top and bottom lines. That surprised exactly no one remotely familiar with Salesforce stock; as I wrote before the report, Salesforce.com hasn't missed on either revenue or earnings in at least five-plus years.Yet it wasn't good enough. The company's guidance looks a bit disappointing, as Nicholas Chahine detailed after the report. The CRM stock price fell 3.7% on the day of the report and dipped almost 1% on the following day. Salesforce stock wound up falling 6% for the week, but it has since regained the majority of its losses.Bu the initial selloff seemed to confirm the risk facing CRM stock and the market. Bear in mind that the CRM stock price over time has been an exaggerated reflection of the market as a whole. It gained steadily in the first years of the decade, as the market recovered, and its gains accelerated in 2016 and 2017, as the stock market gained steam.Salesforce stock peaked in early October 2018 and then plunged as the Q4 selloff hit. CRM stock lost over 25% of its value in less than three months and took three and a half months to gain it all back, and then some.The profit-taking after the strong Q4 report seemed to suggest that investors were paying more attention to risk, but subsequently, as noted above, CRM stock regained most of the losses it had suffered this month. How High Can the CRM Stock Price Go?The issue at this point is that Salesforce stock is expensive, really expensive. It still trades at about 60 times the company's 2020 earnings guidance. At some point, investors will start worrying about the valuation of even a great business, which Salesforce.com unquestionably is.From here, it still looks like valuation fears drove the initial post-earnings reaction. Disappointing guidance is a good talking point, but again, Salesforce.com never misses analyst estimates. It's reasonably obvious at this point that the company guides conservatively. Meanwhile, Q1 and 2019 projections aside, the company also predicted that its revenue would double again by fiscal 2023.There was nothing wrong with the company's Q4 results. The issue is its valuation. But there's another aspect of Salesforce stock that could demonstrate investors' appetite for risk. Salesforce.com predicts that its non-GAAP EPS will come in at $2.74-$2.76, but that includes stock-based compensation of $1.84 .That's two-thirds of its projected net income. Back that out, and CRM stock is trading at over 172 times the high end of this year's earnings guidance. Some investors have questioned whether Salesforce stock should have such a high valuation. If more investors agree, CRM stock likely would be the first stock to take a big hit. Watch CRM Going ForwardBetween the stock's valuation and the company's share-based comp, CRM obviously is a growth stock. And the relatively simple nature of its outlook means there's one key argument regarding Salesforce stock: what to pay for the business. Bulls will argue that paying up for Salesforce stock has been a great bet for nearly 15 years. Bears will reply that, at some point, the rally has to end.That argument is a stalemate right now. It's worth paying close attention to who wins in the near-term. Where CRM stock goes, other growth stocks - like Square (NYSE:SQ), Shopify (NYSE:SHOP) and Workday (NASDAQ:WDAY) - are likely to follow.If Salesforce stock is too expensive, so is pretty much every other stock in the market; few, if any, of them have as an outlook that's as good as CRM. If investors are willing to pay up for CRM stock now, however, they'll likely be willing to stretch for other growth plays. The pre- and post-earnings movements of CRM stock price show the market isn't quite sure which side to take. At some point soon, that will change.As of this writing, Vince Martin has no positions in any securities mentioned. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 5 of the Best Stocks to Buy Under $10 * 7 Single-Digit P/E Stocks With Massive Upside * 7 Best Quantum Computing Stocks Trading Today Compare Brokers The post Keep a Close Eye on Salesforce Stock appeared first on InvestorPlace.
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