Salesforce's Q3 May Prove It Doesn't Need Big Acquisitions To Grow

The solid quarterly results of salesforce.com, inc. CRM may prove that the enterprise software company doesn’t always need acquisitions to boost growth.

Richard Davis of Canaccord Genuity feels the software sector, including Salesforce, could witness a rally in the coming weeks if Autodesk, Inc. ADSK and Workday Inc WDAY also come out with good prints.

“If instead, this quarter brings us a back and forth tape for this sector (as is our expectation), then our advice is that investors use any pullback to build out a full position in one of the top handful of largecap growth software companies. BUY,” Davis wrote in a note.

Salesforce reported third quarter revenue and non-GAAP EPS of$2.145 billion and $0.24, which were respectively $20 million and $0.03 ahead of Canaccord estimates. Salesforce sees 2018 revenue to grow 21 percent, as the company is expected to surpass the $10 billion revenue mark.

“Using the company's own growth/margin framework, we would expect this growth to be accompanied by 100-300 bps in operating margin expansion. Our current estimates have revenue at $10.15B, which is at the high end of preliminary guidance, with 150 bps,” Davis added.

Davis has a price target of $95 on Salesforce, which, at last check, grew 3.25 percent to $77.63.