Citing appealing valuation and the potential for a strong 2017 on various suggested actions (remove large-sized M&A from equation for next year thereby addressing associated concerns, focus on re-escalating organic growth particularly in Marketing Cloud, repurchase shares, emphasize comprehensive product lineup), analyst Brent Thill remains bullish on Salesforce (NYSE:CRM) into the new year, retaining $105 target (current price $73.90) for its shares.
Noting a sell-off across coverage in Q4 2016, analyst Brent Bracelin suggests Microsoft (MSFT +0.1%), Adobe Systems (ADBE +1.7%), Salesforce (CRM +0.2%), Twilio (TWLO +2%), Veeva Systems (VEEV -0.6%), Ellie Mae (ELLI -3.5%) and HubSpot (HUBS +3.3%) represent high-quality cloud opportunities entering the new year.
Further cites public cloud spending at roughly $58B per year currently, expectation for growth in the category to grow to $205B by 2020, and projection for 20% yearly growth in SaaS alone to $129B by the same period.
Morningstar points to expanding profit margins as it makes Salesforce.com (CRM -0.9%) one of its top picks for 2017.
"As Salesforce.com's billing mix tilts more toward renewals vs. new business, it should generate significant operating leverage via sales and marketing and research-and-development spending, yielding consistent margin expansion for several years," the firm says.
Also among top picks: America Movil (AMX -0.6%), set to play in a "rational three-player market" in Mexico, and Cognizant Technology Solutions (CTSH -0.4%).
Shares of Salesforce.com are down 12.6% on the year (and about 19% below May's all-time high), but are still up 30% from a 52-week low hit on Feb. 8.
Analyst Brian White sets target on Twilio (NYSE:TWLO), citing the company's impressive client list and share price undervaluation, at $45 (current price $28.92). Models $345M in revenue and $0.15 loss per share for next year, and $453M revenue and $0.01 loss per share for 2018.
For Salesforce (NYSE:CRM), notes a general move to cloud remains in early stages of development, and suggests the company is still young relative to legacy names (compares Salesforce 12 years out from IPO to Oracle on the same relative basis, pointing out their nearly identical sizes) and warrants a premium valuation. Calculates $10.17B in revenue and $1.30 EPS for 2018, and $12B in revenue and $1.61 EPS for 2019.
Results – revenue $9.07B (+0.8% Y/Y, $50M below estimates), EPS $0.61 ($0.01 above estimates), operating income $3.8B, operating margin 42%, net income $2.6B, short-term deferred revenue $7.4B (+6% Y/Y), operating cash flow on trailing twelve-month basis $14.2B (+9% Y/Y)
Segment revenues – Cloud software as a service and platform as a service $878M (+81% Y/Y), Cloud infrastructure as a service $175M (+6% Y/Y), Total cloud $1.053B (+62% Y/Y), New software licenses $1.347B (-20% Y/Y), Software license updates and product support $4.777B (+2% Y/Y), Total on-premise software $6.124B (-4% Y/Y), Total cloud and on-premise software $7.177B (+2% Y/Y), Hardware products $497M (-13% Y/Y), Hardware support $517M (-6% Y/Y), Total hardware $1.014B (-10% Y/Y), Total services $844M (-2% Y/Y)
Oracle chairman (NASDAQ:ORCL) and CTO Larry Ellison and co-CEOs Mark Hurd and Safra Catz each single out Salesforce (NYSE:CRM) in their respective quarterly report commentaries, strongly emphasizing Oracle's SaaS and PaaS growth rates relative to the competitor.
Philip van Doorn and team at Marketwatch put together a list of 18 S&P 500 names with consensus sell-side price targets at least 30% above the current price.
Ten of the 18 stocks are in healthcare, which has been roughed up by a combination of Obamacare, Clinton's talk about drug pricing (back when all thought she would be the next POTUS), and now Trump joining in the bashing.
Salesforce (CRM +0.2%) to utilize AWS (AMZN +0.1%) infrastructure in Canada, marking the first AWS region to become supported as part of Salesforce's international infrastructure efforts.
Delivery to customers of Salesforce's Sales Cloud, Service Cloud, Community Cloud, Analytics Cloud and other services on the the infrastructure will be enabled. Mid-2017 availability of the integrations is anticipated.
Further related alliances are noted to be expected.
Salesforce (CRM +3.5%) shares are presently trading at $77.97, approximately 2% below pre-Q2 reporting levels. The prior quarter had sparked some concern (isolated U.S. softness etc.), though sentiment at present remains firmly in positive territory.
Salesforce (NYSE:CRM) chairman and CEO Marc Benioff: "I'm delighted to announce that we expect to deliver our first $10 billion year during our fiscal year 2018, which puts us well on the path to reach $20 billion faster than any other enterprise software company."
Workplace initiatives and integrations remain in focus throughout the industry with developments in the space now firmly underway at Facebook (NASDAQ:FB), Google (GOOG, GOOGL), Salesforce (NYSE:CRM), Slack (Private:SLACK), Atlassian (NASDAQ:TEAM) and elsewhere.
General availability of Microsoft Teams (NASDAQ:MSFT) set for Q1 CY2017.