Market Overview

Wall Street Mostly Positive On Salesforce's Q1

Wall Street Mostly Positive On Salesforce's Q1

Cloud company, inc. (NYSE: CRM) reported Tuesday fiscal first-quarter results that were greeted with a mostly unanimous positive reaction from Street analysts.

The Analysts

Morgan Stanley's Keith Weiss maintains an Overweight rating on Salesforce's stock with an unchanged $178 price target.

Credit Suisse's Brad Zelnick maintains at Outperform, $175 price target.

UBS' Jennifer Swanson Lowe maintains at Buy, $190 price target.

Baird's Rob Oliver maintains at Outperform, $175 price target.

Wells Fargo's Philip Winslow maintains at Outperform, $185 price target.

Salesforce traded higher by 3.6 percent at $156.44 per share Wednesday afternoon.

Morgan Stanley: Five Positive Takeaways

Salesforce faced "significant" investor concern amid an "unsettled" macro environment, Weiss wrote in a note. However, the company reported encouraging results highlighted by:

  • Billings growth at 25 percent, which beat expectations of 16 percent;
  • Operating margins improved 120 basis points from last year to 18.2 percent and beat expectations of 17.6 percent;
  • Management continues to see strong demand trends across the customer base; and
  • Service Cloud grew 20 percent year-over-year and is now a $4 billion run-rate business.

Credit Suisse: Surpassing 'Jittery' Expectations

Salesforce showed a "trailblazing start" to the new fiscal year against "jittery" expectations, Zelnick wrote in a note. The outperformance was broad-based, highlighted by strength in the MuleSoft business that helped drive a 22-percent organic constant currency billings growth.

Zelnick said two favorable trends continue to bode well for Salesforce's business: continued demand for cloud-based products and companies increasing focus on serving the end-customer.

Related Link: Marc Benioff Tells Cramer Salesforce Is 'No. 1'

UBS: Secular Versus Cyclical Trends

Macro concerns remain "front of mind" for investors and Salesforce's CEO Marc Benioff acknowledged its customers may also be concerned, Swanson Lowe wrote in a note. Nevertheless, the company hasn't identified any impact to its business today as clients continue investing in their digital transformation.

Salesforce sees the 2019 environment as being comparable to the "healthy spending levels" seen in 2017, the analyst said.

Baird: Guidance Maintained

Management kept its fiscal 2020 revenue guidance as the high levels of demand and a steady environment is balanced with expectations for a $200 million foreign exchange unfavorable hit, Oliver wrote in a note.

Management also guided its fiscal 2020 revenue and EPS to be $3.94-$3.95 billion and 46 cents-47 cents per share versus expectations of $3.94 billion and 65 cents per share. The company will see a one-time charge for of $200 million (20 cents EPS).

The company's full-year EPS guidance was changed from $2.54-$2.56 to a new range of $2.88-$2.90 versus the Street's estimate of $2.67. It's likely some Street analysts haven't adjusted their models to account for April's acquisition.

Wells Fargo: 'Lightning' Remains

Salesforce's report shows there is still "lightning in these clouds" and the company remains the best positioned to the continued mobile and cloud computing replatforming cycle, Winslow wrote in a note. The company is likely to continue leveraging its organic and inorganic investments and cross-sell multiple cloud products to existing customers to expand its already existing competitive lead in the space.

Salesforce is also likely to sustain its strong revenue growth profile and continue showing incremental operating margin expansion, Winslow said.

Photo courtesy of Salesforce.

Latest Ratings for CRM

Oct 2020BarclaysMaintainsOverweight
Oct 2020UBSInitiates Coverage OnBuy
Aug 2020StifelMaintainsBuy

View More Analyst Ratings for CRM
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