Salesforce's Underlying Story Is Unchanged, Says Barclays

Salesforce.com, inc. CRM reported robust quarterly results, with the revenue and EPS ahead of the consensus expectations.

Barclays’ Raimo Lenschow reiterated an Overweight rating on the company with a price target of $89.

Billings Disappoints

Despite the overall robust results, billings and the Q3 guidance were marginally lower than expected.

“The company pointed to some softness in the US towards the end of the second quarter but did not provide much further detail, which will likely keep the shares in check for the time being,” Lenschow mentioned.

Related Link: Wunderlich Confident Salesforce.com Issues Are Minor

Salesforce.com reported billings growth of about 15 percent year-on-year for Q2, while guiding to billings growth of 12 percent for Q3.

“The company mentioned some deal weakness at the end of the quarter as a main factor but we wonder how much the strong performance in Q1 also played a role here as the company had an incentive to deliver strong Q1 results given its all share offer for LinkedIn Corp LNKD,” the analyst stated.

Margins Improve

On the other hand, margins improved slightly in Q2, despite FX and M&A headwinds.

Lenschow believes management is committed to delivering revenue growth while also continuing to improve margins.

Story Unchanged

“Salesforce's comments about weakness at the end of the quarter will increase the nervousness for the whole space. However, we believe CRM is a premium asset and hence investors should look at the name,” the analyst went on to say.

Lenschow believes salesforce.com has scale as well as several growth options, which were likely to drive relative outperformance, even in a slower spending environment.

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