Shares of salesforce.com (NYSE: CRM) are up more than 30% since the beginning of the year, according to data provided by S&P Global Market Intelligence.
After falling 12% in 2016, Salesforce was on fire right out of the gate. Its stock popped more than 15% in January after Salesforce published its "state of the service" report that was well received by analysts. The gains accelerated on rumors that Alphabet was considering an acquisition of Salesforce, but ultimately that did not materialize.
In February, respected investment bank Piper Jaffray reiterated its buy recommendation and $100 price target for Salesforce, adding fuel to the fire. The cloud leader's ascent continued in March and April after it reported fourth-quarter results in which sales jumped 27% and adjusted earnings per share (EPS) leapt 47%. Further gains followed its fiscal 2018 first-quarter report in May, during which Salesforce raised its revenue and earnings outlook for the year ahead.
Salesforce is the big dog in an industry in which profits are largely a function of scale. "For fiscal 2018, we expect to deliver more than $10 billion in revenue -- reaching that milestone faster than any enterprise software company in history," COO Keith Block said in the company's fourth-quarter earnings release.
Moreover, market-share gains, impressive customer-retention rates, and a valuable developer network are helping Salesforce strengthen its position as the leading customer-relationship management platform. That, in turn, should fuel further increases in cash flow, which Salesforce can then reinvest in research and development and additional acquisitions of cutting-edge technology companies. It's a virtuous cycle that's served Salesforce and its shareholders well -- and that's likely to continue in the years ahead.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Joe Tenebruso has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). The Motley Fool recommends Salesforce.com. The Motley Fool has a disclosure policy.