Market Confidence in Salesforce Prompts Shares to Rise: Newsletter February 16, 2018

ImageSalesforce’s shares rose 3.76% on Thursday after Jeffries to upgrade the stock to “buy”. The report increased the target price to $132 per share, representing a 21% upside over the next 12 months. In its anticipation of Salesforce’s improved performance, the report considers robust new subscription annualized contractual value, as well as the company winning back customer favor over Microsoft. Salesforce’s stock is up 38.5% over the last 12 months, and the company’s full earnings report is set to release on February 28.

Industry news this week showed the small business optimism index rose by 2 points up to 106.9 this month, according to a survey released by the National Federation of Independent Business. Of the respondents interviewed, 32% reported now being a good time to expand business, higher than any monthly figures dating back to 1986, indicating record peaks for owner confidence among small companies. Of the 10 components informing the index, six of them increased in January, with a 41% of small business owners expecting the economy to improve (up from 37% one month earlier). According to experts at NFIB, the new tax cuts play a significant role in recently buoyed owner confidence as one in five companies say they plan to increase hiring. Capital expenditure, selling prices and inventory growth are all similarly expected to expand, as consumer spending remains robust.

In e-commerce news this week, Shopify store owners may have experienced a brief interruption in access to their stores, as the Shopify servers went down for 30 minutes at 10:45am on Thursday. Service is reportedly restored, and owners should be experiencing full access to their stores again. Elsewhere in the e-commerce space, Amazon is partnering with Bank of America Merrill Lynch to increase its merchant lending program, according to CNBC insiders familiar with the matter. While last year’s growth in Amazon’s lending program grew just 4.6% last year—a far cry from the c.100% growth in 2016—the strategic partnership comes as part of Amazon’s attempt to seek clarity on their credit risk exposure. Partnering with Bank of America would potentially shield Amazon from some of that risk, allowing them to offer loans to a greater number of merchants. Also in Amazon news, merchants on the marketplace will want to note that Amazon has updated their merchant email policy to allow only one unsolicited customer feedback email per order. The change to the current policy, which states that sellers “may not send more messages than 5 times the average daily order volume plus an additional 600 messages” intends to ensure buyers avoid email fatigue.

Ever wonder what it takes to sell your content-based website for a profit? Founder Thomas Smale was recently featured in an interview with owner of the popular lifestyle-blog website and consulting business, KitchenBloggers.com. Blog owner Trish Lindemood sat down with him to discuss what lifestyle-blog owners can do to increase the value of their business in his 12 Tips to Successfully Sell Your Food Blog. Affiliate, display advertising, and other content-based business owners should read on to learn more about exit planning ahead of a potential acquisition.

New in SaaS business listings we have a $2.9M B2B social media marketing business, boasting rapid revenue growth reaching a c.189% CAGR for the 2015 to 2017 period, over 6,600 customers, a sticky product with incredibly low churn of c.3.1% MRR over the last year and a lean, scalable cost structure.

New in e-commerce business listings we have a $64K Amazon Merch businesswith rapid revenue growth reaching a c.43% CMGR for the period July to December 2017, hundreds of unique designs in the lucrative 2,000 Amazon Merch tier (and eligibility for the 4,000-tier upgrade), a lean and efficient cost structure and low owner involvement. If you are interested in either of the above businesses, follow the links to request a Prospectus.

In events news this week, the FE team is gearing up for LTVConf, tickets for which are now on saleEarly bird prices are available February 19, after which general tickets will go on sale at regular prices. They are selling out quickly, so be sure to book your spot for this expert-packed conference by clicking here. Our February Boston E-Commerce Meetup is coming up on Wednesday 21st February from 6-8pm at WeWork South Station, where we will have a panel of experts discussing how to use data and personalize e-commerce marketing to target specific prospective clients and leads. Our expert panel will include: Seth Rosen, CEO & Co-Founder of CustomMade; Wentao Xiao, CEO & Co-Founder of Zealery; and Michael Gentleman, NA Partner Manager at Fresh Relevance, with more to be announced in the weeks leading up to the event. Click here to RSVP.

Continue reading below for more on Salesforce’s stock, Uber’s fourth quarter losses, Bloomberg’s NFIB report, and Amazon’s partnership with Bank of America Merrill Lynch.
Image

Deal Highlights

New:

SaaS – B2B Social Media Marketing – $66K MRR

  • Consistent growth with revenues reaching a c.189% CAGR for the period 2015 to 2017
  • Leadership position with a known brand in the rapidly growing social media market niche
  • Diversified client base with over 6,600 paying clients and steadily increasing
  • Sticky product with a c.3.1% MRR churn rate over the trailing 12 months
  • Lean and simple cost structure allowing for a scalable business model

Yearly net profit: $637,000
Asking price: $2,900,000

E-Commerce – Amazon Merch – $2.1K gross/mo

  • Rapid growth with revenues reaching a c.43% compound monthly growth rate for the period July to December 2017
  • Hundreds of unique designs in the lucrative 2,000 Amazon Merch tier (eligible for the 4,000-tier upgrade)
  • Lean and efficient cost structure creating a scalable business model
  • Low owner involvement

Yearly net profit: $22,100
Asking price: $64,100

Sold:
SaaS – B2B Data Backup & Recovery – $9.2K MRR​
Affiliate – Home Furnishing – $37K gross/mo​
Affiliate – Health & Medicine – $2.6K gross/mo​
Display Advertising – Art & Décor – $1.2K gross/mo
Affiliate – Home Furniture – $960 gross/mo

Affiliate – Lifestyle – $840 gross/mo​

In the News…

Salesforce Stock Rises following Analyst Report

Salesforce’s stock rose 3.75% on Thursday, following the release of an analyst survey which predicted the CRM giant to have favorable fourth-quarter performance.

Prompted by the report, Jeffries upgraded the Salesforce stock (CRM) to “buy”, increasing the price target on the company to $132 citing strong enterprise growth. The new target set by analyst John DiFucci represents a 21% upside over the next twelve months; Salesforce’s stock is up 38.5% over the last 12 months. The price target on the stock rose from $97 to $132, supported by (anticipated) better-than-expected fourth-quarter sales performance. New subscription annualized contractual value is assumed to have been robust across all regions for the company, and it is a key metric of the company’s performance. Competitive pressure from Microsoft is predicted to have decreased over the past few quarters, creating an easier market for Salesforce to perform in: “Heightened competitive pressures from Microsoft, which we started observing in the August quarter of 2016 for five survey rounds, may have waned for a couple of quarters,” DiFucci wrote. “In five consecutive survey rounds starting in the August-ended 2016 quarter, we had observed a significant uptick in the percentage of surveyed partners that indicated Microsoft is Salesforce.com’s biggest competitive threat, to about 70 percent or higher, versus 60 percent or lower in historical survey rounds. Since last quarter, however, that percentage dipped has below 60 percent again.”

Salesforce will report fourth-quarter earnings on February 28.

Small Business Owner Confidence Reaches All-Time High

A recently released Bloomberg report has indicated that a record number of small business owners say it is a good time to expand operations.

Of the 10 components that make up the small-business optimism index, six had increased in January, showing one of the strongest readings since the index was created 45 years ago. In fact, 32% say it is a good time to expand their business, a figure which comes in higher than all past monthly reports since 1986. Capital spending was measured to show a planned increase by 2 points to 29 percent, which falls in line with indications for an increase in equipment. Unchanged from last month is plans to increase hiring, with one in five small companies reporting their intent to expand. The job market is tight, however, with talent difficult to come by and reported job openings rising from 31% to 34% from last month. According to NFIB’s William Dunkelberg and Holly Wade, the most recent buoy to small businesses’ outlooks comes from the recent tax law, “and federal government-related cost pressures continue to abate, offering a more supportive business climate for small firms. Consumer spending remains supportive, and business spending and housing remain strong.”

A net 41% of small businesses expect the economy to improve, up 4 percentage points from 37% last month.

Uber Reports Slowing Losses

According to their fourth quarter financial earnings report, Uber lost $4.5 billion in 2017.

This loss is up from a $2.8 billion loss reported in 2016, according to figures released by third-party analysts and confirmed by CNBC. The fourth quarter showed losses slowing, however, narrowing the dip to $1.1 billion from the $1.46 billion loss in the third quarter, indicating the ride-sharing company’s losses are large but slowing. In fact, revenue had risen from $9 billion to $11.1 billion in the same quarter. The end of year saw Uber close up shop with $6 billion cash in the bank, 13% less than last year’s cash total at the end of the year, as indicated by Bloomberg. The fourth quarter of 2017 was new CEO Dara Khosrowshahi’s first full quarter operating as leader of the company, following the previous CEO’s exit due to a series of company-culture scandals—including a hack that had exposed data of 57 million people which Uber worked hard to keep covered up.

Uber’s main competitor, Lyft, has increased their market share in recent months. With justifications for their losses citing no desire to sacrifice growth and innovation as reasons to keep the loss margin, it will certainly be interesting to keep an eye on the company’s trends in 2018.

Amazon Partners with Bank of America

According to sources familiar with the situation, Amazon has partnered with Bank of America to provide loans to merchants, according to the sources.

Amazon Lending’s total loan balance growth grew a small amount in 2017, after it had nearly doubled in 2016, reportedly due to a reassessment of their credit risk exposure. Jeff Bezos released a shareholder letter in 2016 where he announced his plans to partner with banks in order to expand Amazon’s lending program for merchants who sell on Amazon’s site. Now, CNBC reports that sources familiar with the matter have confirmed Amazon’s partnership with Bank of America. The strategic alliance would allow Amazon to reduce their lending risk to access capital specifically to provide credit to more merchants, allowing the Amazon sellers to acquire more inventory to be sold through the marketplace. As a reminder, Amazon lending is an invitation-only loan program that offers Amazon marketplace sellers loans from anywhere between $1,000 to $750,000, to be paid back in a year, for businesses that may have trouble securing traditional business loans. Recently, however, Amazon’s acceleration of the loan program’s growth has slowed, with insider’s reporting the company’s desire to better understand their exposure to risk.

While reports from Amazon merchants who have taken part in the program are generally good, small businesses should know that options like PayPal and Square are just as viable.