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6 Analysts Review Salesforce's 'Strong' Q3

6 Analysts Review Salesforce's 'Strong' Q3, inc. (NYSE: CRM) reported third quarter earnings and guidance Tuesday. Here's a recap of what some of Wall Street's top analysts are saying after the print:

'Good Place To Be In 2018'

Canaccord Genuity's Richard Davis maintains a Buy rating on Salesforce's stock with a price target increased from $120 to $130.

At a time when "fear trumps greed" on Wall Street, Salesforce's earnings report confirmed the stock remains a "high quality name" and a "good place to be in 2018," Davis said in a Tuesday note. Some of the notable aspects of the earnings report include:

An increase of $3.8 billion or 31 percent in booked business from a year ago to $15.9 billion.

Sales Cloud grew at an "impressive" 17 percent rate year-over-year.

Service and App Cloud accelerated from a quarter ago to 25 percent and 34 percent, respectively.

Salesforce also inked a deal with the Department of Homeland Security in the quarter, which represents the largest public sector contract in the company's history, Davis said. There's "not a whole lot" of bearish items that should concern investors, the analyst said. 

Credit Suisse: Conservative Guidance

Credit Suisse's Michael Nemeroff maintains an Outperform rating on Salesforce's stock with an unchanged $120 price target.

Salesforce's third quarter report was "strong" and there is reason to believe management's fourth quarter guidance is conservative, the analyst said in a Wednesday note. Salesforce guided its fourth quarter deferred revenue to 19-20 percent year-over-year, which implies a full year growth of around 19 percent in billings. This compares to the Credit Suisse billings growth estimate of 20.7 percent.

Deutsche Bank: Reasonably Priced Stock

Deutsche Bank's Karl Keirstead maintains a Buy rating on Salesforce's stock with a price target raised from $115 to $120.

Salesforce's results could be characterized as being "in-line with higher expectations" given the Street's strong sentiment heading into the print, Keirstead said in a Wednesday note. One of the few drags in the quarter was a "light" $126 million operating cash flow, which marks a decrease of 18 percent along with the absence of a raise to the full year OCF outlook, according to Deutsche Bank. 

The OCF shouldn't be of much concern to investors given strong recent billings that are expected to convert into strong collections in the fourth quarter, Keirstead said. And Salesforce's decision to cease guiding deferred revenue was viewed as a negative, but management is likely to offer new guidance metrics during the fourth quarter conference call, the analyst said. 

Salesforce's stock is still "reasonably priced" for a company that boasts a 20 percent growth profile with room for further margin improvements, Keirstead said. 

Related Link: Salesforce Falls Despite Q3 Beat

BMO: Improved Confidence

BMO Capital Markets' Keith Bachman maintains an Outperform rating on Salesforce's stock with a price target raised from $112 to $118.

Salesforce reported a "mostly really good" quarter that's highlighted by "beats across the board," a "huge bookings growth" and a guidance which "seems conservative," Bachman said in a Tuesday note. The guidance is likely to result in some near-term selling pressure, but the longer-term outlook has improved, he said.

The analyst raisedhis free cash flow estimate for fiscal 2019 from $2.505 billion to $2.521 billion, a reflection of "improved confidence" in the company's positioning and financial model. The stock's multiple also deserves to rate higher from 32x EV/FY19E FCF to 34x EV/FY19E, Bachman said.

Bank Of America: Formidable Bookings

Bank of America's Kash Rangan maintains a Buy rating on Salesforce's stock with an unchanged $125 price target.

Salesforce's bookings are "formidable," and the the off balance sheet contractual backlog of $11.5 billion and deferred revenue of $4.4 billion are figures that are "unparalleled in the software industry," Rangan said. Salesforce is likely to sustain an organic top line growth rate of 20 percent-plus over the next three years as the company progresses to a $20-$22 billion revenue rate in fiscal 2022, the analyst said. 

Assuming a $25 billion revenue rate in fiscal 2022 and a margin rate of 35 percent, the company could generate an EPS of $7 per share , which suggests the stock has "significant potential long-term upside from here," Rangan said. 

Morgan Stanley: Typical Guidance Shouldn't 'Dissuade'

Morgan Stanley's Keith Weiss maintains an Overweight rating on Salesforce's stock with an unchanged $127 price target.

The bullish case for Salesforce's stock was reinforced in the quarter, the analyst said in a research report. Salesforce boasts four businesses each running at $1 billion-plus rate with sustainable or even improving growth, according to Morgan Stanley.

It's "not hard to see" a clear path toward a $22 billion revenue run rate in fiscal 2022, Weiss said.

Related Link:

KeyBanc Finds A Surprise In Salesforce's Q3

Latest Ratings for CRM

Dec 2019MaintainsOverweight
Dec 2019MaintainsOutperform
Nov 2019MaintainsOutperform

View More Analyst Ratings for CRM
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Posted-In: Bank of America BMO Capital Markets Canaccord Genuity cloud Credit SuisseAnalyst Color Analyst Ratings Tech Best of Benzinga


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