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Salesforce Sets Its Sight On $20 Billion In Annual Revenue

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salesforce.com, inc. (NYSE: CRM) seems to be paving its way towards an annual revenue target of $20 billion, backed by multiple acquisitions in 2016, Wunderlich's Ryan MacDonald said in a report. He reiterated a Buy rating on the company, with a price target of $101.

Growth Framework

Salesforce ramped up its M&A activity in 2016, with the targeted growth and margin framework being at the core of its strategy. Under this framework, the company expects to generate 20-30 percent revenue growth with non-GAAP operating margin expansion of 100bps-300bps.

“As a result, operating cash flow growth will equal revenue growth,” analyst Ryan pointed out.

Expanding TAM

During its analyst day, Salesforce updated the size of its TAM to about $70 billion in 2016 and projected a CAGR of 11 percent to reach $105 billion by 2020.

“This is a substantial y/y increase as CRM sized its expected 2020 TAM at $75B at last year's Dreamforce. The delta in the market sizing is derived from increased opportunities in platform, analytics, and commerce, all areas in which CRM has invested heavily organically and via M&A,” Ryan wrote.

Salesforce indicated that with this size of TAM it could generate $20 billion in revenue in the long term.

 

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Latest Ratings for CRM

DateFirmActionFromTo
Feb 2017NeedhamInitiates Coverage OnHold
Jan 2017Pivotal ResearchDowngradesBuyHold
Dec 2016Drexel HamiltonInitiates Coverage OnBuy

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