Should You Buy or Sell CRM Stock Ahead of Its Earnings?

Forbes

27-05-2025

20 March 2025, Bavaria, Munich: The Salesforce logo and lettering can be seen on the facade of the ... More company's Munich headquarters on March 20, 2025 in Munich (Bavaria). Photo: Matthias Balk/dpa (Photo by Matthias Balk/picture alliance via Getty Images)
Salesforce (NYSE:CRM) is set to announce its earnings on Wednesday, May 28, 2025. For traders who operate based on events, historical trends around earnings announcements can serve as a significant reference. In the past five years, CRM stock has exhibited a varied but predictable pattern the day after its earnings announcement: in 50% of occurrences, it posted a positive one-day return with a median increase of 7.4%, while in the remaining 50% of instances, it recorded a negative one-day return with a median decrease of 5.5%.
Although actual results compared to consensus forecasts will greatly impact the stock's movement, grasping these historical probabilities can assist traders in positioning themselves effectively. There are two primary strategies for event-driven traders: assessing historical probabilities and taking a position prior to the earnings announcement, or watching the correlation between immediate and medium-term returns after the earnings are disclosed and then adjusting their positions accordingly.
Analysts expect CRM to announce earnings of $2.55 per share on revenues of $9.75 billion, up from $2.44 per share on revenues of $9.13 billion for the same quarter last year. From a fundamental angle, CRM currently has a market cap of $262 billion. In the last twelve months, the company generated $38 billion in revenue, showcasing robust operational profitability with reported operating profits of $7.7 billion and a net income of $6.2 billion. If you are looking for potential gains with less volatility than individual stocks, the Trefis High Quality portfolio offers an alternative — it has surpassed the S&P 500 and yielded returns exceeding 91% since its inception. Also, see – What Sparked UNH Stock Crash?
See earnings reaction history of all stocks
Some insights on one-day (1D) post-earnings returns:
Additional information for noted 5-Day (5D) and 21-Day (21D) returns following earnings is summarized along with the statistics in the table below.
CRM 1D, 5D, and 21D Post Earnings Return
A comparatively less risky approach (although not beneficial if the correlation is low) is to comprehend the correlation between short-term and medium-term returns after earnings, identify the pair that presents the highest correlation, and execute the relevant trade. For instance, if 1D and 5D indicate the highest correlation, a trader can position themselves "long" for the following 5 days if the 1D post-earnings return is positive. Here is some correlation data based on 5-year and 3-year (more recent) history. Note that the correlation 1D_5D refers to the relationship between 1D post-earnings returns and subsequent 5D returns.
CRM Correlation Between 1D, 5D and 21D Historical Returns
At times, the performance of peers can affect the stock's reaction post-earnings. In fact, the pricing might start even before the earnings are made public. Here is some historical data regarding the previous post-earnings performance of Salesforce stock compared to the stock performance of peers that reported earnings just prior to Salesforce. For fair comparison, peer stock returns also reflect post-earnings one-day (1D) returns.
CRM Correlation With Peer Earnings
Learn more about Trefis RV strategy that has outperformed its all-cap stocks benchmark (a combination of all three: the S&P 500, S&P mid-cap, and Russell 2000), delivering substantial returns for investors. Additionally, if you are looking for potential gains with a more stable performance than an individual stock like Salesforce, consider the High Quality portfolio, which has exceeded the S&P and achieved >91% returns since its inception.