Look for Salesforce.com (CRM) to disclose a big investment gain from the initial public offering of Snowflake stock on its third-quarter earnings report, says a UBS analyst. CRM stock hit the jackpot earlier this year on its stake in Zoom Video Communications (ZM).
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Snowflake stock has dipped about 18% from its all-time high on the software maker’s first day of trading on Sept. 16. Still, Salesforce stock will recognize a big mark-to-market investment gain on its Snowflake (SNOW) stake in the October quarter, UBS analyst Karl Keirstead said in a Nov. 17 report to clients.
Snowflake stock jumped 5% to close at 260.54 on the stock market today.
With underwriters pricing Snowflake stock at 120, shares opened at 245 on Sept. 16. Shares popped to 310 in intraday trading before closing at 254.
Salesforce co-led a $479 million funding round for Snowflake along with Dragoneer Investment Group.
CRM Stock: Snowflake Stake Worth $1.4 Billion?
“Recent filings clarified that Salesforce owns 2.08 million Class A shares, 2.17 million Class B shares that convert to Class A shares within 60 days, and another 1.699 million Snowflake Class B shares that convert to Class A shares beyond 60 days,” said Keirstead. “This totals 5.95 million shares, which at the current Snowflake share price is an investment now worth about $1.4 billion.”
San Mateo, Calif.-based Snowflake sells cloud-computing-based technology for storing and analyzing data.
Salesforce stock rose 0.4% to 257.16 on Wednesday.
Aside from the Snowflake stake, Keirstead says Salesforce has made investments in other startups such as Automation Anywhere, Conga, Gusto, Informatica, Stripe and Tanium.
Salesforce Recorded Gain On Zoom Video Stake
In its April quarter, CRM stock also recognized an investment gain in Zoom Video stock. However, Salesforce sold its stake in Zoom Video in the July quarter, according to reports.
Zoom Video stock has retreated 33% from its all-time high of 588.84 set on Oct. 19. It’s still up 479% in 2020.
Amid Covid-19, demand for Zoom videoconferencing software has surged as businesses told employees to work from home. Zoom morphed into a social phenomenon as making video calls became routine for consumers to keep in touch with family and friends.
Keirstead expects Salesforce to report strong results in its core business on Dec. 1.
Salesforce will report October-quarter profit of 75 cents, flat from a year earlier, according to consensus estimates. Revenue will rise 16% to $5.25 billion, analysts estimate.
CRM stock trades slightly below a double-bottom entry point of 270.26.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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