Citi Concerned With Forex Impact Ahead Of Salesforce's Q3 Results

While salesforce.com, inc’s CRM fundamental setup appears “favorable” for Q3, currency pressures have continued to intensify, Citi’s Walter Pritchard said in a report. He maintained a Buy rating on the company, with a price target of $89.

Pritchard expects Salesforce's results for Q3 of 2017 to reflect “stronger” fundamentals, backed by “easier comps, steady business inputs and low bar from 2Q17.” He added, however, that currency has continued to exert pressure on the company’s figures, with the Pound declining another 8 percent on a sequential basis.

Pritchard estimated a -6.3 point impact to Salesforce's reported billings growth and a -2.3 point impact to the company’s subscription revenue growth.

The analyst projected organic constant-currency billings growth of +11 percent year-over-year for Q3, having reduced the reported billings estimate from $1.738 billion to $1.681 billion, versus Street expectation of $1.734 billion. The total revenue estimate was cut from $2.118 billion to $2.116 billion, versus the Street expectation of $2.118 billion.

There is potential for 3-4 percent upside to the estimates, Pritchard noted. He added, “Solid results and guidance would help towards returning stock to favor, though we think stock multiple could be capped until M&A controversy diminishes (still an open question).”