Why Salesforce.com Stock Jumped 10% in May

By Markets Fool.com

Image Source: Salesforce.com.

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What: Shares of software-as-a-service provider Salesforce.com jumped 10.4% in May, according to data provided byS&P Global Market Intelligence. The company's first-quarter results beat analyst estimates, and guidance was rosier than expected.

So what: Salesforce reported quarterly revenue of $1.92 billion, up 27% year over year, and $30 million higher than the average analyst estimate. COO and President Keith Block described one factor behind the company's impressive growth: "We continued to drive larger and more strategic transactions in the first quarter, including yet another 9-figure transaction. No other enterprise software company is building strategic relationships of this size and scale -- and certainly not at this pace."

Non-GAAP EPS came in at $0.24, up from $0.16 during the prior-year period, and $0.01 higher than analysts expected. On a GAAP basis, Salesforce reported EPS of $0.06. Operating cash flow jumped 43% year over year, topping $1 billion for the first time.

In addition to beating expectations for the first quarter, Salesforce raised its fiscal 2017 revenue guidance by $80 million, to a range of $8.16 billion to $8.20 billion. The average analyst estimate stood at $8.12 billion prior to the increase. For the second quarter, Salesforce expects revenue between $2.005 billion and $2.015 billion, up 23% year over year, and ahead of the average analyst estimate of $1.982 billion.

Now what: Salesforce's streak of steady revenue growth continued during the first quarter. Deferred revenue also grew at a healthy rate, up 31% year over year, and unbilled deferred revenue jumped 27%, to $7.6 billion. GAAP profitability is slowly improving, but Salesforce still barely generates any real profits.

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For investors willing to pay a steep eight times revenue for Salesforce, growth is the main concern. The company once again managed to beat analyst estimates and increase its guidance for the full year, two things that investors have come to expect.

The article Why Salesforce.com Stock Jumped 10% in May originally appeared on Fool.com.

Timothy Green has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Salesforce.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.