Tech Stock Favourites: Salesforce.com, Inc.
We published a note on the Invast blog in early September citing Salesforce’s disappointing earnings release. At the time, we said more downside is possible and we provided clients with an exact trading recommendation around that view. Click here to see what we said at the time.
We still hold the view that momentum in the stock will take some time to reverse – keep in mind that Netflix has suffered for most of 2016 despite being one of the best performing stocks in 2015. It takes for the market to regain trust and we feel that all eyes are betting on another earnings disappointment in the next few months when Salesforce needs to come back with updated trading.
The short term benefit for Salesforce stock is reluctance to partake in any Twitter acquisition. We don’t think they’ll be at the table anyways as they have a large enough product pipeline being internally developed. Take for example artificial intelligence around the B2B sales process – something we’re positive about but is probably still a little too far away to offset the disappointment in Salesforce earnings.
For around the same market cap, we think Netflix provides better value on a risk to reward basis and so Salesforce stock is likely to continue trending lower going into the next earnings release. No real change to our September view – except with an eye cast carefully at how Salesforce manages its reported role in the Twitter takeover arena. Some reasonable support at around the US$70 level, if that breaks, there could be a lot more pressure selling.
That could trigger a re-evaluation of our view.
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Chief Market Analyst
Peter Esho is a member of Invast’s Investment Committee and Chief Market Analyst at Invast Financial Services in Australia. The Invast’s Investment Committee constructs professionally constructed global thematic portfolios of Direct Market Access (DMA) CFDs over highly liquid global shares and ETFs through its new PortfolioInvestor platform. Since 1960, the Invast Group has grown to become one of the largest and most successful global brokerage firms, offering state-of-the-art trading technology and unparalleled service catering to all levels of traders.
Invast Financial Services Pty Ltd (ABN 48 162 400 035) is regulated by the Australian Securities and Investments Commission and holds an AFS Licence 438283 which authorises it to carry on a financial services business in Australia.