Salesforce.com, Inc. (NYSE: CRM) shares dipped 3.5% after the company reported third-quarter revenue and earnings ahead of consensus analyst expectations on Tuesday. Revenue performance obligation (RPO) growth guidance of 21% for the fourth quarter came up short of consensus expectations of 23%.
The negative market reaction comes after the stock has underperformed the S&P 500 overall this year. Salesforce has been aggressively spending to grow its business, acquiring Tableau for $15.3 billion and soending $1.35 billion on ClickSoftware so far this year.
Several Wall Street analysts have weighed in on Salesforce. Here’s a sampling of what they’ve had to say.
Still A Top Stock Pick
Bank of America analyst Kash Rangan said Salesforce offers a rare bullish combination of organic revenue growth, margin expansion and acquisition synergies.
“The fundamental strength of Salesforce.com’s business, vision, FY24E revs guidance, commitment to OM+, sales execution, clear disclosures and quality of 3Q20 results don’t jive with -10% vs NASDAQ YTD,” Rangan wrote in a note.
Canaccord Genuity analyst Richard Davis said Salesforce remains his top large-cap core holding recommendation.
“Valuation is a measure of risk, and since we can’t predict when investors will experience another inevitable bout of panic, it makes sense to stick to super high-quality companies at reasonable valuations – and Salesforce is at the top of that list,” Davis wrote.
Baird analyst Rob Oliver said third-quarter numbers reinforce Salesforce as a top stock pick.
“Salesforce.com reported a strong 3Q20 (October) quarter which was highlighted by current RPO growth +28% yr-yr (+22% ex-Tableau) and an acceleration in the two largest clouds (Sales Cloud +15% yr-yr and Service Cloud +24% yr-yr),” Oliver wrote.
Wedbush analyst Steve Koenig said Salesforce’s demand trends are strong, and management is executing its strategy well.
“We expect sales momentum to continue in FY20, driven by large deal activity and continued multi-product traction,” Koenig wrote.
Mizuho analyst Gregg Moskowitz said Salesforce’s third-quarter numbers were impressive and its fourth-quarter guidance appears to be conservative.
“Our checks clearly point to healthier organic growth, and as a result we expect that CRM will post solid upside to this forecast,” Moskowitz wrote.
Ratings And Price Targets
- Bank of America has a Buy rating and $200 target.
- Canaccord Genuity has a Buy rating and $185 target.
- Baird has an Outperform rating and $185 target.
- Wedbush has an Outperform rating and $192 target.
- Mizuho has a Buy rating and $195 target.
Given Salesforce pre-announced full-year results at Dreamforce, so expectations for the earnings report were high. It’s rare that so few analysts have anything bad to say about a company, so investors should take Wednesday’s modest sell-off with a grain of salt.
Salesforce stock traded around $155.83 per share at time of publication.
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