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Bernstein's Bearish Stance On Salesforce No Longer Applies

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Bernstein's Bearish Stance On Salesforce No Longer Applies

Bernstein's bearish case against salesforce.com, inc. (NYSE: CRM) no longer applies as the company "created a path" to achieve the necessary growth rate.

The Analyst

Bernstein's Mark Moerdler upgraded Salesforce from Underperform to Market Perform with a price target lifted from $102 to $125.

The Thesis

The case against Salesforce's stock was based on the premise the company won't be able to organically generate a revenue growth rate north of 20 percent, Moerdler said in the note. But this is no longer the case, as the company's fourth-quarter earnings report was "very strong" from a bookings perspective as deferred revenue grew 25 percent and total backlog rose 40 percent. The company is seeing an increase in sales momentum due to its strong platform offering and a healthy spending environment.

Salesforce's acquisition of MuleSoft will also contribute both inorganic and organic sales growth in fiscal 2019 and fiscal 2020, which would help the company achieve the analyst's 20 percent revenue growth requirement through at least 2020.

Moerdler said Salesforce's ability to generate an operating margin north of 30 percent in the long-term or 300 to 400 basis points of margin improvement per year remains a concern. Nevertheless, the company's ability to generate a revenue growth rate of more than 20 percent makes it "unlikely investors will exit the stock en-mass or increase their focus on margin expansion."

Price Action

Shares of Salesforce were trading up about 1 percent at $123.84 Thursday afternoon.

Related Links:

Wall Street Reacts To Salesforce's $6.5-Billion Mulesoft Acquisition

19 Companies Google Could Buy With Its $102 Billion In Cash

Image credit: Dion Hinchcliffe, Flickr

Latest Ratings for CRM

DateFirmActionFromTo
Aug 2019Initiates Coverage OnBuy
Jun 2019MaintainsBuy
Mar 2019Initiates Coverage OnOutperform

View More Analyst Ratings for CRM
View the Latest Analyst Ratings

Posted-In: Bernstein Mark Moerdler MuleSoft SAASAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga

 

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StockFirmActionPT
XELMaintains60.0
SOMaintains54.0
SREMaintains141.0
EXCMaintains56.0
ESMaintains77.0
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