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Salesforce Benefiting From Compounding Effect As Profitability Finally Following Top-Line

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Raimo Lenschow of Barclays reaffirmed his Overweight rating on salesforce.com, inc. (NYSE: CRM) following strong quarterly results, driven by healthy 31 percent billings growth.

But, investors are concerned with guidance of just about 7 percent billings growth for the first quarter, when the company faces tough comps.

Related Link: Salesforce Still Best Positioned At The Top Of The Cloud

That said, Lenschow believes the underlying fundamentals remain unchanged and growth will return to its normal trajectory following the first quarter.

“In this respect, we would use any weakness as a buying opportunity as Salesforce continues to grow healthy at scale and is now also starting to deliver better margins and cash flow,” Lenschow wrote in a note.

The analyst is also pleased with the fact that margins and cash are starting to follow solid topline, representing a compounding effect. The company’s guidance is looking for 125-150bp margin increase.

“We think CRM is truly a unique asset in the industry, the company has reached a scale that creates a huge barrier of entry for large enterprise players like Oracle and SAP. This is something that next generation vendors like Workday Inc (NYSE: WDAY) have not yet achieved,” Lenschow added.

At last check, shares of Salesforce rose 2.88 percent to $83.69. The analyst has a price target of $89.

Latest Ratings for CRM

DateFirmActionFromTo
Nov 2017Credit SuisseMaintainsOutperform
Nov 2017Morgan StanleyMaintainsOverweight
Nov 2017UBSInitiates Coverage OnBuy

View More Analyst Ratings for CRM
View the Latest Analyst Ratings

Posted-In: Barclays Raimo LenschowAnalyst Color Reiteration Analyst Ratings

 

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