Customer relationship software giant Salesforce.com (CRM), which I first wrote about on June 18, 2009 at a price of $40.16, should register impressive growth in 2010 and 2011, hence the stock remains attractive, despite being a little pricey.This year, Salesforce.com is going to face difficult quarterly sales comparisons, commonly known in Wall Street circles as 'difficult comps,' but that's a good thing: it beats the alternative. Further, look for revenue to rise 20-25% in 2010, followed by a 15-20% gain in 2011.
Salesforce.com's business model is linked to the overall success of the economy. When that economic recovery was distant, institutional investors shunned CRM, which designs software that lowers up-front investment, increases vendor accountability, and enables flexible subscription pricing, among other benefits. With both the U.S. and global economies in recovery mode, institutional investors have piled in to the stock, on the likelihood of stronger-than-expected enterprise information technology spending, and due to CRM's market leadership position. The First Call FY2010/FY2011 EPS estimates for CRM are $1.28 to $1.63.
Technically, Salesforce.com's stock corrected roughly in-sync with the Dow's late January/early February correction, and has since moved back above the key, 50-day moving average, a sign that institutional investors took advantage of to establish positions. CRM also cleared psychological resistance at $70 with relative ease.
2010 Outlook: I view Salesforce.com as a long-term play, but if investors are looking to sell CRM within the year, it's probably best to take your profits after it rises to $78-79, if it fails to rise above $80.
Stock Analysis: I consider Salesforce.com to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 25% position in CRM now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 50% of my CRM position before April 2010 and I'd put a sell/stop loss at: $43.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
Technically, Salesforce.com's stock corrected roughly in-sync with the Dow's late January/early February correction, and has since moved back above the key, 50-day moving average, a sign that institutional investors took advantage of to establish positions. CRM also cleared psychological resistance at $70 with relative ease.
2010 Outlook: I view Salesforce.com as a long-term play, but if investors are looking to sell CRM within the year, it's probably best to take your profits after it rises to $78-79, if it fails to rise above $80.
Stock Analysis: I consider Salesforce.com to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 25% position in CRM now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 50% of my CRM position before April 2010 and I'd put a sell/stop loss at: $43.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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