Wedbush Reiterates Salesforce At Neutral, Expects 'Continued Momentum'

Wedbush reiterated its Neutral rating on salesforce.com, inc. CRM and $66 price target ahead of the company reporting Q1 results on May 20.

Analysts Steve Koenig and Jaw Cho expected "continued momentum" and estimated that Q1 revenue would come in “about $12M ahead of consensus,” while the EPS estimate was a penny ahead.

The analysts estimated total revenue of $1.51 billion on subscription revenue of $1.41 billion. The fiscal Q1 2016 EPS estimate was $0.15 on an unchanged operating margin of 11.0 percent.

The Estimize consensus was for EPS of $0.14 on revenue of $1.510 billion. The Wall Street consensus was for EPS of $0.14 on revenue of $1.500 billion.

Koenig and Cho estimated 28 percent deferred revenue growth year-over-year and 14 percent billings growth, both in line with company guidance. Salesforce also had "room to raise full-year guidance by $20M and guide 2Q revenue slightly up from consensus and in line on EPS."

The analysts believed “the commercial (inside) sales organization has been executing well, likely covering up a shortfall in enterprise (field) sales results.”

Koenig also thought management’s expectations remained high for the head of global sales, Keith Block, “to deliver better performance from the enterprise unit” through a transformation of the company’s “sales culture from a point-product focus to solution selling using multiple products.”

There were some things the analysts felt were affecting performance, but were beyond the company’s control including “maturation of the sales automation opportunity and challenges associated with growing from a large revenue base.”

Addressing reports that the company is looking for a buyer, Koenig thought any deal would need to come in at a minimum 20 percent premium over current price levels, or about $85 per share.

“This valuation implies over 8x EV/ NTM revenue multiple, which is rich but maybe not out of the question considering CRM’s market leadership and strategic value,” according to Koening.

salesforce.com closed at $71.79, up 0.03 percent.