JPMorgan Reaffirms Salesforce As One Of The Rare Cloud Assets That's A 'Long-Term Share Gainer'

JPMorgan’s Mark R Murphy maintained an Overweight rating on salesforce.com, inc. CRM, saying that the company’s quarterly performance had been highly differentiated and much better than feared. Salesforce’s results exceeded consensus expectations “across almost all relevant business metrics.”

The company reported 25 percent revenue growth, beating the consensus by 1 percent. Calculated billings accelerated to 28 percent y/y, handsomely beating the consensus expectation of 21 percent.

Analyst Mark Murphy mentioned the key highlights as:

1. The platform business accelerated to 43 percent y/y, and emerged as the fastest growing business, followed by Service Cloud.
2. Salesforce enjoyed significant momentum in large deals, with more than 600 7-figure plus transactions in the quarter.
3. The company indicated that there had been “a growing number of CEO level conversations driving transformations, highlighting its elevating strategic importance among large global companies,” Murphy wrote.
4. Management raised the revenue guidance for FY17 to $8.1B at the midpoint, ahead of consensus expectations. The midpoint translates to 22 percent y/y growth. The company also guided to margin expansion of 125-150 bps y/y and OCF growth of 23-24 percent, “demonstrating leverage in its model that investors rarely see with growth companies.”

Murphy added, “We are highly encouraged by the results and we reaffirm our thesis that CRM is one of the rare cloud assets with a multi-product success story and a long term share gainer.”