For starters, if you’re not familiar with CRM, it stands for customer relationship management and is a technology for managing all company relationships and interactions with existing and potential customers, which is critical for improving any business.
The absolute market leader in this field is Salesforce (NYSE: CRM) with a 19.8% market share globally. That’s more than #’s 2-5 in terms of market share combined, and they are no slouches (Oracle, SAP, Adobe, Microsoft). In short, Salesforce is the apex predator of the CRM savannah.
Salesforce has been growing at a rapid pace which is reflected in its stock price. Since its IPO in 2004, the stock has climbed more than 7000%, turning a $5,000 investment in 2004 into $350,000 today, even outperforming stocks like Amazon which is not an easy thing to do.
The company also heavily outperforms their competition in terms of revenue growth which is increasing by more than 20% annually, a number that keeps accelerating further.
Another thing we like about Salesforce, besides it’s dominant market position and strong financials, is the fact that the company’s business model is evergreen.
What do we mean by that? Salesforce’s services helps business to automate repetitive tasks and optimize their organization, enabling them to cut costs and boost efficiency during tough economic times. Based on this, we think Salesforce has the potential to ‘hold the line’ even during periods when the macro-economic situation gets more challenging.
Now, with the stock trading at its all-time-high it is easy to think that it might be too late to invest at this point. However, it’s important not to forget that the company consistently has produced new all-time highs since 2004 and with the CEO Marc Benioff aiming for the company to hit $50 billion in annual sales by 2026 (up from $21 billion in 2021) we think there is still a lot of room to grow for this company.
In conclusion, we rate this stock a solid buy on pullbacks.
Technical Analysis
With recent earnings coming in very positive (not surprising), buyers have pushed the stock up to its all-time-highs around $275 which is a key resistance.
The most structural key support area is resting around $200-$210 and we think that a pullback towards this area would be an excellent opportunity to start building a long-term position in Salesforce.
Option Positioning
Currently there are about 400K calls and 390K puts out there amongst option traders. There are about 18% of the options rolling off next Sept. op-ex, so no short term pressures on the stock. Support from an options perspective comes in around $240-250.
FULL DISCLOSURE: Chris Capre currently has no stock or option position in CRM. If you’d like to learn more about Chris’s trades and positions, you can get access via the Trading Masterclass where he shares his live trades, further investment ideas and daily market analysis.
