How The Big Boys Are Playing Salesforce After Earnings

Shares of salesforce.com, inc. CRM were volatile during Thursday's after-market trading session following the company's second-quarter report. Shares initially traded lower to $65.90 before rebounding. The stock opened at $69.00 on Friday and saw buying momentum right after the opening bell.

Here is a roundup of what Wall Street's top analysts are saying after the print.

Canaccord: ‘Pretty Solid'

Davis admitted he was cautious heading into the print, but given the company's "solid" yet also "a bit conservative" longer-term fundamental outlook (24 to 25 percent annual free cash flow growth on 20 percent revenue growth), the stock is "particularly attractive" following the recent decline.

Davis also noted that the second-quarter report contained "not a whole lot" of bearish items. On the other hand, bullish items include a backlog of booked business (on and off the balance sheet) standing at $9.2 billion, which is 26 percent higher year-over-year.

Shares remain Buy rated with an unchanged $85 price target.

Related Link: Salesforce Beats Q2 Estimates, Shares Rise

FBR: Overall Positive Demand Environment

Samana also noted that Salesforce's quarter benefited from improved cost controls, and the "natural leverage" in the business model playing out. As such, the company's "healthy" pipeline and weaker foreign exchange headwinds resulted in an upward revised guidance for fiscal 2016.

Samana continued that this thesis remains unchanged and the company is on track to deliver revenue growth above 20 percent along with 150 basis points of gross margin erosion in both fiscal 2016 and 2017, which is a "rare combination" for a company of its size.

Finally, the analyst suggested that next month's Dreamforce conference should "help restore some momentum" in the stock as the company's CEO Marc Benioff hinted a new cloud may be announced.

Shares remain Outperform rated with an unchanged $82 price target.

Wedbush: ‘Incrementally' More Positive

Steve Koenig of Wedbush commented in a note that Salesforce reported an "outsized" beat and guidance range. In addition, the reported headline results "testify" to stronger new contracting activity in prior quarters than expected.

Koenig continued that the "strong" earnings print makes him "incrementally" more positive on the likelihood of sustained revenue momentum and share gains, especially when he doesn't see any negative company-specific catalysts.

However, the analyst suggested that the company's $45 billion valuation is "fairly full" for a company that mainly focuses on the $18 million Salesforce market.

Shares remain Neutral rated with a price target raised to $73 from a previous $72.

Pacific Crest: Impressive Quarter, Conservative Guidance

Brendan Barnicle of Pacific Crest commented in a note that Salesforce produced "another clean quarter, leaving little room for naysayers."

Barnicle continued that Salesforce grew the Sales Cloud by 10 percent year-over-year – an "impressive" accomplishment given the sector's high level of penetration – while Service Cloud also grew by an "impressive" 39.7 percent, which demonstrates the increasing demand for service support. Meanwhile, Salesforce1 Platform grew by 36.3 percent which demonstrated the company's "strong" development platform and Marketing Cloud's 29.0 percent growth was possible due to twice as many large deals compared to last year's quarter.

Barnicle also noted that it is "highly likely" that third-quarter billings and earnings per share guidance are "conservative," as billings growth is expected to grow at least as quickly in the new quarter.

Shares remain Overweight rated with an unchanged $80 price target.

Morgan Stanley: ‘Clearing A Path' To Catalysts

Keith Weiss of Morgan Stanley commented in a note that Salesforce continues to deliver "sustained" growth combined with "solid" margin improvement, which resulted in a 53 percent year over year growth in free cash flow.

Weiss continued that the company also demonstrated a strong case to support a bull thesis as growth could be sustained across multiple cloud.

Looking forward, Weiss is expecting: 1) the Dreamforce conference to bring new solutions into the company's portfolio, 2) the seasonally strong back half of the year should yield "even strong gains" and 3) Salesforce should report topline, margin and free cash flow beats in future quarters.

Shares remain Overweight rated with an unchanged $85 price target.

Elsewhere On The Street

At the time of this writing, Salesforce is currently trading up about 1.5 percent, at $68.81.

• Analysts at DA Davidson maintained a Neutral rating with an unchanged $75 price target.
• Analysts at Wunderlich maintained a Buy rating with an unchanged $85 price target.
• Analysts at Bank of America maintained a Buy rating with an unchanged $80 price target.