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Salesforce's ‘Trailblazing’ Results Ease Doubts on Wall Street

Salesforce's ‘Trailblazing’ Results Ease Doubts on Wall Street

(Bloomberg) -- Salesforce.com Inc. posted its biggest gain in five months as the software company eased shareholder jitters after first-quarter results and a strong revenue outlook topped Wall Street projections.

Several analysts reiterated buy-equivalent ratings on the stock with Credit Suisse’s Brad Zelnick calling the results a “trailblazing start” to fiscal 2020. J. Derrick Wood, an analyst at Cowen, recommended being “aggressive buyers of shares” since concerns about billings and business momentum have now been largely put to rest.

The shares rose as much as 4.8% Wednesday, their biggest gain since Jan. 4.

Salesforce's ‘Trailblazing’ Results Ease Doubts on Wall Street

Here’s what analysts are saying:

SunTrust Robinson, Terry Tillman

“Salesforce remains a top large cap core tech holding in our opinion.”

“We are encouraged by the company’s ability to maintain revenue guidance despite expecting more than $200 million in FX headwinds for FY20.”

Buy, price target $183

Wedbush, Steve Koenig

Salesforce.com’s first-quarter revenue beat by “an impressive” $55 million despite increasing foreign currency headwinds. “Billings, unearned revenue, and cash flow metrics were also well ahead of expectations.”

“The only middling metrics were the new remaining performance obligation (RPO) and current RPO disclosures, which were only in line with guidance on a constant-currency basis.”

Koenig said he’s “noticed increasingly negative sentiment” on Salesforce.com but solid results for the first quarter “should set the stage for more positive price action from this SaaS bellwether as it beats and raises expectations throughout this year.”

Outperform, price target $192

Piper Jaffray, Alex Zukin

“Salesforce posted a strong quarter, with beats across major metrics including billings, revenue, and OCF, while current RPO growth came in slightly below guidance due FX headwinds.”

“While we were surprised to see the weaker than expected RPO, we acknowledge the lack of historical data and newness of the metric, and would expect typical patterns of guided metric outperformance to resume going forward.”

“We believe the stock remains attractive here given growth durability and favorable valuation.”

Overweight, price target $180

Cowen, J. Derrick Wood

“We would be more aggressive buyers of shares” with first-quarter concerns now largely put to rest.

“Commentary around the demand [environment] and benefits from recent internal changes were encouraging.”

“Investors should be reminded of the stability and durability” of Salesforce.com’s business model given the solid quarterly performance amid some internal changes.

Outperform, price target $185

Credit Suisse, Brad Zelnick

First-quarter results were a “trailblazing start” to fiscal year 2020. “The outperformance was broad based with notable strength in MuleSoft helping drive +24% y/y constant currency current RPO growth and 22% organic constant currency billings growth.”

“We continue to appreciate CRM’s positioning among various enterprise IT spending drivers.”

Outperform, price target $175

What Bloomberg Intelligence says

“alesforce.com’s 1Q results reiterate the company’s sound execution in the strong IT-spending environment. With 22% growth in its remaining performance obligations, or sales under contract, this stability should persist.”
-- Anurag Rana, senior technology analyst
-- Click here for the research

To contact the reporter on this story: Kamaron Leach in New York at kleach6@bloomberg.net

To contact the editor responsible for this story: Catherine Larkin at clarkin4@bloomberg.net

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