Top Analyst Bullish On Salesforce.com Following Record Quarter
salesforce.com, inc. (NYSE: CRM) reported record earnings this morning, marked by unprecedented growth and favorable operating margin. As a result of promising trends, top analyst Brian Schwartz of Oppenheimer believes the stock is destined for growth.
This morning, Schwartz reiterated an Outperform rating on Salesforce.com (CRM) with an $88 price target. Schwartz is a top analyst in the technology sector. He averages a 10.4 percent one-year return per recommendation. According to TipRanks, he is in the top 2 percent of all analysts.
Here is why the analyst is bullish on CRM:
Earnings & Guidance
Salesforce posted revenues of $1.809 billion; $18 million above consensus. This jump marks a 27% year-over-year increase. Earnings per share were $0.19. As a result, management guided both first quarter and full-year 2017 revenue and EPS above consensus, causing the analyst to raise his own estimates. The analyst comments, ““Management also guided CY2016 EPS above consensus, a pleasant surprise given our concerns that SteelBrick expenses and robust intra-quarter sales hiring that we detected could dampen near term margin trends.” This quells his previous concerns surrounding SteelBrick expenses; a quote-to-cash vendor purchased by the company for $360 million in December.
Positive Macro Environment
In the earnings call, management reported a record quarter marked by excellent customer satisfaction, high demand in all segments, product innovation, and a record 600 deals. This positive environment is expected to continue and supports Schwartz’s bullishness. He comments, “Management had uplifting commentary on the macro environment with positive takeaways on 4Q business activity across all products, geographies, and customer size.”
The company signed two of its largest deals this quarter, including its first ever nine-figure deal with an unnamed insurance company. Additionally, the Salesforce highlighted renewals with Unilever and Charles Schwab. Management indicated $11 billion of booked, billed, and unbilled revenue on their balance sheet. Schwartz elaborates, “The bookings commentary from management remains strong, particularly with large deals signed in 4Q, and operating margin keeps improving with scale.” The company reported non-GAAP operating margins increased by 177 basis points, resulting in a 37% y/y increase in operating cash flow. The analyst explains that these positive trends should add value to CRM shares because it highlights the stock’s attractive profile as a large cap stock with increasing profit margins and fast recurring revenue growth.
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