A Salesforce To Be Reckoned With, Says Wunderlich

salesforce.com, inc. CRM reported another quarter of strong results, and raised guidance. Wunderlich’s Rob Breza maintained a Buy rating for the company, while raising the price target from $93 to $101. The analyst commented that the company continued to execute well across the board and its raised guidance still appears conservative.

1Q Results

Salesforce reported its F1Q17 revenue and EPS at $1.916B and $0.24, ahead of the consensus of $1.893B and $0.23, respectively. The beat was driven by strong growth within the Sales Cloud and force.com. Operating margins of 14.5 percent were better than expectations of 13.5 percent.

The company mentioned that a higher percent of total invoices had moved to annual invoicing, which now constituted 79 percent.

Guidance

Salesforce announced its 2Q revenue guidance at $2.005B-$2.015B, ahead of the consensus of $1.98B and representing ~23 percent growth. The guidance for EPS was at $0.24-$0.25, marginally missing expectations of $0.25 at the midpoint.

The company raised its revenue guidance for FY17 from $8.08- $8.12B to $8.16B-$8.20B, representing growth of 22-23 percent. The EPS guidance for the year was raised from $0.99-$1.01 to $1.00-$1.02.

Estimates Raised

Analyst Rob Breza raising the FY17 revenue and EPS estimates from $8.154B to $8.200B and from $1.01 to $1.02, respectively.

Valuation

Breza noted that shares are currently trading at a discount to the next-gen SaaS group, while the new price target assumes shares will trade at a premium. He explained, “In our opinion, a premium multiple is justified, given the company's size, dominance, and ability to expand into adjacent markets and internationally compared with other next-gen software companies.”