Compass Point Says Salesforce A Core Holding For Investors, Bullish On Workday

Cloud company salesforce.com, inc. CRM should be considered a core holding due to an impressive business model that showed a durable growth profile over the past decade, according to Compass Point.

The Analyst

Compass Point analyst Marshall Senk initiated coverage of Salesforce with a Buy rating and $190 price target.

The analyst also initiated coverage of Workday Inc WDAY with a Buy rating and $138 price target.

Salesforce: The Standard In Digital

Salesforce's success over the years resulted in the company earning a reputation as both a market leader and thought leader within the digital transformation industry, Senk said in the Monday initiation note. (See his track record here.) 

The company was also early to the market and built a full portfolio of services through organic R&D and acquisitions, the analyst said.

Most recently, the launch of Customer 360 gives the company the ability to gather information from nearly every application or data source, he said. 

Salesforce established itself a as a major player in the CRM space, with a 32% market share in sales, 19% share in service, 10% share in marketing and 5% share in e-commerce, Senk said.

Encouragingly, of the 150,000 Salesforce customers, 38% deployed more than one cloud, which gives the company an opportunity to increase sales with existing clients, the analyst said. 

The company's recent move to acquire Tableau Software gives Salesforce an opportunity to be a major player in analytics and AI, according to Compass Point. 

Workday: Steady Growth Opportunity

Workday is a leader in the human capital management space and offers solutions to cover an employee's entire life and needs, Senk  said in a Monday initiation note.

The company is well-positioned for steady growth, as the HCM market is expected to grow at a 9% compounded annual growth rate through 2023 to reach $30 billion, the analyst said. 

Workday continues to expand its total addressable market to include adjacent opportunities like financials and analytics, he said.

Workday only targets high-growth segments in the cloud — and has a leg up against legacy vendors who don't have a significant cloud penetration, Senk said.

This gives Workday an opportunity to win over clients who understand their business is much different today than it was 20 years ago, making cloud solutions more appropriate, according to Compass Point. 

Price Action

Salesforce shares were trading higher by 2.83% at $144.70 at the time of publication Tuesday, while Workday shares were up 1.62$ at $192.82. 

Related Links:

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The Street Debates Workday's Q1 Report

Photo courtesy of Workday.