One Analyst's View Of Dreamforce, The Massive SaaS Conference

• salesforce.com, inc. CRM shares are up 20 percent year-to-date, but have been under pressure since mid-August, declining a little over 2 percent.
• Wunderlich’s Rob Breza maintained a Buy rating on the company, with a price target of $85.
• The company introduced IoT Cloud during its analyst day, and Breza believes that this represents a significant bookings driver.

During Salesforce’s Analyst Day, management reiterated its long-term financial strategy. The company still plans to achieve a “balanced combination” of 20-30 percent revenue growth and operating cash flow generation, driven by 100-300 bps of operating margin expansion.

Salesforce started the event by introducing another cloud offering, known as the IoT [Internet of Things] Cloud. The latest offering allows “proactive connection with users of connected devices based on data points gathered from the device.”

Analyst Rob Breza wrote, “Salesforce introduced its newest Internet-of-Things (IoT) cloud to help companies connect events, devices, clickstreams and applications to take advantage of big data. We believe the new IoT cloud could become a significant bookings driver in a few years as many customers will likely start with small deployments in the first couple years.”

Excluding the opportunity related to IoT Cloud, Salesforce estimates its existing multi-cloud opportunity at about $51B. This market is projected to grow at a CAGR of 9 percent and reach $75B by 2020.

Breza mentioned that the company also aims to focus on integrating or embedding analytics across its five clouds, which is expected to accelerate customer adoption.

In the report Wunderlich noted, “Salesforce visibility remains paramount in the industry as the company has been entering each fiscal year with approximately 80% of revenue under contract and enters each quarter with approximately 95% under contract.”

While increasing the visibility, renewing customers over the past decade also results in revenue seasonality in Q4, which is the company’s largest quarter, followed by strong cash flow collections in Q1, Breza noted.