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Does Salesforce.com Deserve Wall Street’s Pessimism?

Enterprise software-as-a-service giant salesforce.com (NYSE:CRM) delivered a strong fourth-quarter earnings report, with revenue up by double-digit percentages, and it beat expectations on key metrics. Yet Wall Street bid its shares lower for the week.

In this segment from Motley Fool Money, host Chris Hill and senior analysts Andy Cross, Ron Gross, and Jason Moser discuss the reasons why the customer relationship management powerhouse might be worrying investors, the leadership of CEO Marc Benioff, and its aggressive growth forecast. They also consider whether it ne to make further acquisitions, and the state of its advancing technology.

A full transcript follows the video.

This video was recorded on March 8, 2019.

Chris Hill: Shares of Salesforce down 6% this week after guidance for the first quarter came in light. Andy, you look at the fourth-quarter results for Salesforce, they were pretty darn strong.

Andy Cross: Really impressive for a $100 billion company. And that guidance was not that light. Just look at the quarter, it was $3.6 billion in revenues. That was up 26%. That was above guidance. Subscription and support revenue, up 26%. A non-GAAP EPS of $0.70, which was far higher than the estimates. Cash generated up 24% for the full year. They have a cash flow yield, if you just look at the cash flow vs. revenues, of 26%. Salesforce continues to be the leader in the CRM — customer relationship management — space. They’re growing their influence. They guided for a four-year growth rate of sales of north of 20%, which, again, for a $100 billion market cap company, it’s exceptionally aggressive. Maybe some analysts think that might not be possible, but Marc Benioff, who is a co-founder, owns more than 4% of the company, almost $5 billion worth of stock, has his life built into Salesforce, I certainly wouldn’t doubt him too much. His history of delivering is pretty exceptional for Salesforce customers and shareholders.

Hill: We were talking before we started taping, you go back a couple of years, Salesforce was in the conversation, all these reports that we saw, of possibly acquiring Twitter. When you look at this business and the way Benioff has built it out, do you look and think, “OK, these plans are great in terms of organic growth.”

But, do you want to see him go out and make some acquisitions, whether it’s Twitter or something else?

Cross: I don’t. They bought MuleSoft for $6.5 billion and they’re continuing to integrate that into their platform. They just partnered with Google Analytics 360, so now their clients have access to Google Analytics more seamlessly. They continue to invest in things like AI. Their Einstein AI delivers more than 6 billion predictions every day. They’re really building this platform for all kinds of global customers to have a 360-degree view to their entire customer life cycle, from sales to bringing them into the platform. That’s really impressive as we think about the world being more and more integrated. Salesforce is a leader in that space.