Here's Why Salesforce.com Dropped 11% in December

Salesforce.com (NYSE: CRM) stock fell 10.8% following a disappointing earnings announcement on Nov. 30. While the company outpaced Wall Street estimates for revenue and earnings, analysts were dissatisfied by its growth outlook.

Salesforce.com reported 27% revenue growth in its most recent quarter, which was more or less in line with analyst expectations. The company produced a small net profit and was free cash flow-positive. There's typically a tradeoff between profitability and a high growth rate, so investors are generally pleased when a stock can deliver both. The company also reported 23% growth in remaining performance obligations, which is a popular metric for software companies that measures bookings for future periods. That suggests that its elevated growth rate will continue, but it could slow down slightly.

That potential slowdown is exactly what weighed on the stock. Salesforce.com issued guidance for the final quarter of its fiscal year, and those forecasts suggest a slight slowdown. Its adjusted EPS outlook fell well short of Wall Street estimates, too. The company expects operating margin compression because of higher employee expenses and costs related to sales and marketing.

Source Fool.com