BTIG: Salesforce Weakness Partially Due To Seasonality

Although salesforce.com, inc. CRM reported broadly in-line Q2 results, there is likely to be investor concern regarding “the full implications of the underwhelming billings performance and guidance,” BTIG’s Joel P. Fishbein said in a report. He maintained a Buy rating on the company, with a price target of $100.

Salesforce reported Q2 billings growth of merely 15 percent y/y, representing the first mid-teens growth rate in the company’s billings since F1Q14, analyst Fishbein noted. The slowdown resulted from weakness in the US.

Guidance Implies Further Deceleration

Salesforce’s Q3 guidance implies a further slowdown in billings growth to 12 percent y/y. “We think this can partly be attributed to the seasonality of the business, as 1Q and 3Q typically show the largest sequential declines, while the post-Dreamforce 4Q notably outperforms with the strongest growth of the year,” Fishbein wrote.

Although Q4 may prove to be the strongest-growth quarter, the Q2 results and Q3 guidance put increased pressure on the company being able to deliver strong Q4 results, the analyst mentioned. He added that Salesforce should be able to achieve more than 20 percent billings growth for the full year; however, the stock may be volatility in the near term due to investor concerns over the issue.

“Regardless, we see the innovation pipeline and recent acquisitions as augmenting the company’s long-term value proposition, and believe in Salesforce’s ability to drive shareholder value,” Fishbein commented.

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