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Assume We All Know Nothing

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Assume We All Know Nothing
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Salesforce Q4 FY1/26 Earnings Review

by Alex King, Cestrian Capital Research; Magician’s Assistant, Claude CoWork

First, let’s parcel up some prejudices and leave them at the door so that we can think clearly about $CRM stock.

  • Here’s mine: (i) I dislike their customer service, I find it unhelpful and designed to squeeze smaller customers like us out of their supply chain or else to just milk for cash along the way. (ii) I think the company is long in the tooth and is ripe for displacement. (iii) I think the CEO should drop the will-he-won’t-he step down and either get on with it or in fact step down and let someone else get on with it.
  • Here’s yours: _______________________________ [fill in the blank]

OK let’s put all that in an envelope and then toss it, because It Does Not Matter What We Think. What matters is this:

  • The stock is at a technical inflection point where it may very well turn and keep running up rather than selling off
  • Revenue growth has accelerated for the last three quarters and is guided to accelerate further.
  • Cashflow margins are at record highs and the company has ample liquidity available to it - on its balance sheet and by way of a bond issuance to fund buybacks.
  • Remaining Performance Obligation - the order book - is seeing accelerating growth, as is deferred revenue - the prepaid part of the order book - and this has historically led to accelerating revenue growth.
  • Finally, the company has announced material cost-cuts due to the internal adoption of AI - this will not be the last cut, I expect, and this will help accelerate earnings growth.

I think, in short, that $CRM stock has a real chance to move up, and bigly; better, its chart means that a fairly proximate stop can be used to protect against undue losses.

Let’s take a look at the numbers, the valuation, the stock chart and our rating.