News and analysis

The market value of Salesforce (CRM) frustratingly plunged by nearly 17% in extended trading on May 29 to echo the cloud computing service company's quarterly numbers as well as its forward guidance for the rest of the year. In particular, the current quarter's projections of Salesforce management have been lower compared to Wall St consensus expectations. Adjusted equity per share (EPS) is expected within a range between $2.34 and $2.36 on revenue of $9.20 billion to $9.25 billion. Thus, both top and bottom figures clearly missed analyst pool bets, with investment houses representatives betting on EPS of $2.40 based upon revenue of $9.34 billion on average. The company's remaining performance obligations (cRPO) annual growth in constant currency was reported at 10% against the previously foreseen 12%. Subscription and support revenues for Q1 were at $8.59 billion to mark a 12% increase for the last 12 months.

As to the full fiscal year of 2025, Salesforce has only slightly corrected its expected subscription pace forecast to "around 10%" from the previous "10%+" potential. Yet, the speed and size of asset's fall seems very excessive. And this crash mostly happened due to overoptimistic mood in the recent months, when the crowd preferred to ignore signs of more or less unharried scenarios for Salesforce business instead of fast joining the AI revolutionary rally. This was probably the case when unrealistic dreams may rather lead to sad surprise and disappointment. And so, the market isn't happy to deal with smooth evolution instead of revolutionary growth. Some analysts even began to doubt the SaaS (software as a service) model of business, used by Salesforce, when cloud-based software programs just deliver all applications to end users in an internet browser.

Such conclusions seems to be premature after Q1 EPS number of $2.44 on revenue of $9.13 billion was still better in terms of money return than consensus estimates at $2.37 for EPS on revenue of $9.15 billion. EPS jumped 44% YoY, which cannot be characterized as moving ahead with slow pace. Another positive argument is that Salesforce CEOs are keeping intact their revenue guidance for the whole fiscal year of 2025. The company's mission of managing customer relationships, integrating the business segments and building applications is still in demand. CRM has been actively investing into AI features and this would pay off handsomely one day. Higher-for-longer interest rates are the same for the cloud service segment, yet the weaker forward guidance by CRM is in contrast with solid numbers from cloud giants like Amazon Web Service and Microsoft's Azure service as both are expecting higher customer spending soon. Therefore, Salesforce's cloudy income looks rather postponed for a while.

The share price of about $230 at the moment, instead of the recent $270+ highs is discounted and potentially advantageous from this point of view. All the growth of the last six months faded, and so the inertial decline may continue up to any of $200+ levels, but buying activity from current prices is already attractive to us. CRM business scaling is only waiting for its next-after-covid and proper new time for recovery and further growth.

Ren (REN) has surged by 6.7% to $0.0750 this week, outperforming major crypto assets. In comparison, Bitcoin (BTC) has only added 0.7% to $68,000. However, Ren needs to break through the resistance at $0.0750 to climb further.

Notably, the token has surged by 30% over the past 10 days amid speculation about the SEC's approval of spot ETH-ETFs. Additionally, the bankrupt crypto exchange FTX announced that it would pay its creditors the dollar value of their deposits at the time of bankruptcy. Ren, being closely associated with FTX, could benefit from this news.

If Ren manages to climb above the $0.0750 resistance, it could potentially reach $0.1000. This represents a tempting 33% upside.

NVIDIA's Zeppelin continues to build the stairway to heaven for the rest of the IT segment. Its share price hit the next $1150 sky this week. The leading AI chipmaker's market value is approaching $2.8 trillion, being only at a $100 billion distance from the current capitalisation of Apple, which is the second-most valuable company on Wall Street after Microsoft. As a result, the tech-heavy Nasdaq Composite index closed the regular session of May 28 above 17,000 for the first time ever, creating a solid basis for more rallies to the upside. New highs on both Nasdaq 100 (USTech100) and S&P 500 (US500) contracts are only a matter of time and probably a short wait, even though the price charts for Nasdaq 100 futures adjusted by nearly one percentage point down in the pre-market trading on Wednesday. So, any temporary dips above 18,500 could be used to open new long positions in USTech100, with an initial target price being placed in the direct vicinity of 20,000. For the S&P 500 futures, 5,500 points are considered as the next reasonable target.

Then came remarks by Minneapolis Federal Reserve chief that interest rate hikes are not completely ruled out when he said yesterday during an event in London that "the odds of US raising rates are quite low, but I don’t want to take anything off the table”, as "many more months of positive inflation data" are needed to give confidence that "it’s appropriate to dial back”, according to his recent interview with CNBC. If one would only ask my opinion, this kind of rhetoric may be good to postpone the effects of growing bullish appetite but far from being enough to cancel our hearty dinner.

As to another loud informational occasion behind this round of NVIDIA rally, the AI indisputable leader soared by 6.98% in one trading day, additionally boosted by a blog post of Elon Musk’s startup xAI, which raised $6 billion in a bid to challenge OpenAI. Several months ago, Elon Musk launched Grok to create a potentially strong rival to OpenAI’s ChatGPT, currently a partner of Microsoft. Grok has been trained on to be integrated into X.com, the social network formerly known as Twitter, led by executives with previous experience at Alphabet’s DeepMind, Microsoft and Tesla. Elon Musk had been an early supporter of OpenAI but later withdrew his capital from OpenAI, citing potential dangers of the technology. Later, Musk called for a pause in AI development.

Now the newly raised funds will be reportedly applied to bringing xAI’s first products to market, building advanced infrastructure, and accelerating work on future technologies. In a partnership with Oracle, xAI is planning to make a massive supercomputer, having it operational by fall 2025 to power the next version of Grok. And clusters of NVidia’s flagship H100 graphics processing units (GPUs) would be at least four times the size of the largest GPU clusters currently in existence.

This intensifies the competition for NVidia chips between giant companies such as Meta, Google and Microsoft, but this completion will ultimately push all of them higher and higher. The demand for the chips would grow bigger, while the increasing highs example of NVidia stock is contagious in and of itself. This means that any technical breakthrough to be performed (almost inevitably) by Microsoft (MSFT) share price, above the nearest and historical resistance of $430 per share, would show it the highway to the next $480 to $500 area.

A rather inspiring news came from Stephan Winkelmann, Lamborghini's CEO, as he clearly noticed the brand is currently focused on plug-in hybrid powertrains for its supercars while it is still taking a wait-and-see approach to potential production of purely electric machines, as Lamborghini keeps abreast of the demand and doesn't think completely electric supercars will catch on. Instead, Winkelmann prefers designing combustion engines to run on e-fuels as well.

A well-known and originally Italian manufacturer of luxury sports cars and SUVs (sport utility vehicles) is now owned by the Volkswagen Group through its subsidiary Audi. The share price of Volkswagen AG (VOW3) added nearly 3.5% on Xetra DAX to bounce from its below €120 technical support level to €123.50, which could be associated with the direction of its constituent brands' policy, including Lamborghini management's openness in its sympathy to hybrids. The company that specializing in off-roaders, speedy and powerful cars admits the segment's customers want "emotions" which "only a large-displacement ICE" (internal combustion engine) can deliver. Winkelmann said using EVs may not be as thrilling in such types of cars at least as a high-revving gas engine mounted behind the seats. Again, when one is riding an off-road car, the driver may face lack of electric car charge stations nearby somewhere in a mountainous area. Such places could also be busy with other EV owners or it may take too much time to refuel electric cars.

High-end purchasers don't want electric supercars. That's why Nevera electric supercar, which is designed, engineered and handcrafted in Croatia, is still for sale, despite it looks simply perfect in terms of technical implementation. The hype around Nevera was so loud, but the limited production run of only 150 cars, and the price of the 2022 Rimac Nevera car just started above $2,000,000.

Lamborghini’s first EV would not arrive until 2028, and it's not going to be a supercar, they say. The pioneer EV model may take the shape of a lifted 2+2 grand tourer with four seats. The Huracan model successor will have gas power as well, while something like Lamborghini's Revuelto is demanded in hybrid engine configuration. So, this is exactly what is on the agenda. Why? There's just no business case. This is the most realistic approach to business. Lamborghini engineers may also take advantage from the progress of another Volkswagen Group's brand Porsche in the field of using nearly carbon-neutral synthetic fuels. So, it's only wise that Volkswagen brands are still keeping the internal combustion engine alive, being ready to bet on reality rather than science fiction.

From the point of view of technical analysis, each subsequent wave of price correction on Volkswagen was weaker than the previous one and failed to touch previous lows, since the beginning of 2024. This fact also makes an inertial re-test of the nearest €128 three-month resistance a very likely scenario, with better chances to break through this barrier to a €140+ area, which was last seen in February-March of 2023.