After Stellar Q3 Earnings, Salesforce.com Inc. (CRM) Is Expected to Stay StrongBy Carrie Williams
The CA-based cloud computing company Salesforce.com Inc. (NYSE: CRM) had announced its Q3 numbers on November 17, reporting both earnings and revenue beat, as well as a huge surge in billings. Its stock shot up by nearly 7% within a day following the results. After the announcement Barclays analyst Raimo Lenschow weighed in on the ‘bounce back quarter’ of CRM recently, and maintained his Buy rating as well as a $89 price target on the stock, implying an upside of 14.44% from the last close price of $77.77.
Salesforce has reported a healthy overall performance across all the products as well as regions in Q3. While Sales Cloud grew by 13% YoY, Marketing Cloud growth was reported as 46%. Salesforce reported its fastest growth in platform product segment and it currently accounts for 20 percent of revenue.
Regionally, America grew by 27% YoY, while Asia Pacific reported a 38% growth and Europe reported a constant currency growth of 27%. For Q3, CRM’s EPS was $0.24 (beat by $0.03) while revenue increased by 25.1% to $2.14 billion (beat by $20 million). The billings were up 19%, beating the consensus estimate of 13%.
The company also announced the guidance for FY18 revenue as $10.1 billion-$10.15 billion, thanks to the record number of seven-figure+ deals as well as seven large financial services customers gained in 3Q. Thanks to the decline in share prices catalyzed by the Twitter Inc. buyout rumor, Lenschow believes that the current levels of CRM are an attractive entry point for buying the stock and considers the stock as a premium asset.
However, investors are also slightly wary regarding the increased competitive pressure from Microsoft in the price-sensitive mid-market sections. Since Microsoft’s product appears to be ‘good enough’ and costs lesser than salesforce.com, the mid-market customers might decide to go with Microsoft in the future. Yet, the confidence exhibited by CEO Mark Benioff that he expects Salesforce to hit the $20 billion mark “faster than any other enterprise software company” does not seem like a pipe dream for the company, as CRM continues to stay ahead of key secular themes in the space, with direct participation in Internet of things, mobile computing, machine learning, and social and cloud computing broadly.
According to recent recommendations on CRM in the past three months, the overall consensus rating on the company is currently a Strong Buy with an average price target of $93.47, based on TipRanks.com. The PT is an upside of 20.19% from its current levels.