How Much Money is Salesforce (CRM) making in the Cloud?

Salesforce (CRM) proves that customer relationship management, or CRM technology, is a lucrative business.

Salesforce’s quarterly gross profit rose from $3.292 billion on 31 January 2020 to $4.223 billion on 31 January 2021. Impressively, Salesforce’s quarterly operating income rose from -$36 million on 31 January 2020 to $193 million on 31 January 2021.

Similarly, Salesforce’s quarterly revenues grew from $4.851 billion on 31 January 2020 to $5.817 billion on 31 January 2021. Thus, Salesforce.com Inc. (NYSE: CRM) added almost $1 billion in revenues during a pandemic.

Moreover, Stockrow estimates that Salesforce’s revenues grew by 19.91% in the quarter ending on 31 January 2021. However, that revenue growth rate fell from 34.64% in the quarter ending on 31 January 2020.

Why is Salesforce growing?

Salesforce (NYSE: CRM) has a 19.8% share of global CRM market, Backlink.info estimates.

Backlink.info estimates that Salesforce’s market share is larger than its four leading competitors combined. Over 150,000 businesses worldwide use Salesforce business solutions Backlink.info estimates.

I think Salesforce is growing because of its focus on the cloud. Salesforce offers two clouds to customers, the Sales Cloud and the Service Cloud.

Backlink.info estimates that Salesforce’s Sales Cloud annual revenues grew from $2.7 billion in 2016 to $5.19 billion in fiscal year 2021. The Sales Cloud generated 25.97% of Salesforce’s subscription and support revenues and 24.42% of Salesforce’s annual revenues.

Similarly, Salesforce’s Service Cloud annual revenues grew from $1.82 billion in 2016 to $5.38 billion in fiscal year 2021. The Service Cloud generated 31.38% of Salesforce’s subscription and support revenue and 29.51% of Salesforce’s total company revenue in 2021.

Demand for cloud services is growing because more sales and customer service people are working from home. In particular, the cloud drives the demand for Salesforce’s subscription and support segment. Backlink.info estimates that subscription and support comprised 93.99% of Salesforce’s total revenues in fiscal 2021.

How Salesforce cashes in on the Cloud

Salesforce (CRM) offers a large package of cloud services in its Customer 360. The Customer 360 services include Sales, Service, Marketing, Commerce, Analytics, Integration, a Platform, Learning, Employees, Artificial Intelligence, and Single Source of Truth.

Single Source of Truth is a unified customer profile across all the touch points in a company’s ecosystem. Single Source of Truth can allow an executive to monitor customer identities, data, marketing, and privacy management.

Another popular Salesforce product is its Appexchange. The Appexchange is an App Store for customer service professionals that gives them access to apps from many companies.

Those Apps include Query Sound, Trail tracker, DocuSign eSignature, Conga Composer, Rollup Helper, S-Docs, Adobe Sign, MailChimp, Agile Accelerator, RingLead, Validity’s DupeBlocker, Duplicate Check, Survey Force, Asana for Salesforce, Genesys Cloud for Salesforce, Demand Base, Blackthorn Payments, SurveyVista, SMS Magic, Backthorn Events, and MFA Dashboard.

How Much Money is Salesforce making from CRM?

Salesforce.com (CRM) is generating more cash from its cloud CRM. For instance, the quarterly operating cash flow grew from $1.814 billion on 31 January 2020 to $2.388 billion on 31 January 2021.

Similarly, the quarterly ending cash flow rose from $277 million on 31 January 2020 to $2.471 billion on 31 January 2021. Additionally, Salesforce’s quarterly financing cash flow fell from $232 million on 31 July 2020 to -$38 million on 31 January 2021. Thus, Salesforce is paying off its debts.

However, Salesforce’s total debt grew slightly from $6.253 billion on 31 January 2020 to $6.409 billion on 31 January 2021. Hence, Salesforce grew its revenues and did not increase its debts.

Impressively, Salesforce’s cash and short-term investments grew from $7.947 billion on 31 January 2020 to $11.966 billion on 31 January 2021. Thus, Salesforce is a cash-rich company that accumulated more cash during a pandemic.

What Value Does Salesforce.com have?

I think Mr. Market overpriced Salesforce.com (NYSE: CRM) at $230.84 on 3 June 2021.

I do not think Salesforce is making enough money to justify the $230.84 price. Mr. Market, however, disagrees. Salesforce’s share price grew from $176.36 on 1 June 2020.  

On the other hand, Salesforce offers enormous value for that price. For instance, Salesforce reported $66.301 billion in total assets on 31 January 2021. The total assets grew from $55.126 billion on 31 January 2020.

Thus, I think Salesforce offers a high margin of safety because of the growth, cash, and share price. Therefore, Salesforce is a growth stock with a high margin of safety.

There are some drawbacks to Salesforce (CRM). It pays no dividend, for example. Yet I consider Salesforce a growth stock with a high margin of safety.

 Originally published at https://marketmadhouse.com on June 3, 2021.