salesforce.com, inc. (NYSE:CRM) recently posted a pretty decent quarter. Revenue in the period came in at 2.56 billion — 26% more than the revenue posted in the second quarter of 2016. Analysts were expecting the Cloud company to report a revenue of $2.52 billion — Salesforce stock isn’t exactly going through the roof presently.
Salesforce also upped its full year earnings guidance to $1.29-$1.31 per share, and the revenue guidance to $10.35 billion-$10.4 billion. Despite the upbeat results, Salesforce shares failed to gain value.
Salesforce stock is operating in a highly competitive market, where Cloud behemoths like Microsoft, Amazon, and Oracle enjoy a massive market share. The Street wants CRM to focus more on next-gen technologies including AI and Cloud-based predictive analysis.
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Last year, the San Francisco-based Cloud computing company made several acquisitions to increase its market footprint. But so far in 2017, the company has made only one acquisition. salesforce.com’s second largest business segment, Salesforce Service Cloud, is failing to meet its growth targets. As a result, the company is continuously making changes to the segment’s management.
The company recently appointed Microsoft veteran Bill Patterson as the senior vice president and product management leader at the Services Cloud business. Mr. Patterson will be the fourth leader of the Services Cloud segment in the last four years.
Despite the market’s reaction to the second quarter earnings, the fact remains that the quarter was excellent. For the first time in its history, salesforce.com achieved a $10 billion run rate. Gross margins in the quarter came in at 74%, much better than the industry average.
Several analysts rejected the market’s reaction to Salesforce stock amid its second quarter results. They believe that the stock is poised to grow and has several catalysts for the future. Richard Davis of Cacaccord Genuity called the quarterly results “exceptional”. Davis said that his firm is “thrilled” to buy the stock. He also upped the price target for Salesforce shares to $110 from $100.
Stifel thinks that Salesforce shares lost value due to the weaker-than-expected guidance. But the firm maintained that the guidance doesn’t depict any problems at Salesforce. Stifel says that Salesforce’s revenue in the coming quarters will rise amid the deferred revenue growth.
SunTrust also recommended investors to buy salesforce.com on the current weakness to gain from the catalysts which will start bearing fruit in the second half of 2018.
Raymond James analyst Brian Peterson also increased his price target on Salesforce to $125 from $109. Peterson said that investors should be encouraged by the Sales Cloud growth and improved billings in the second quarter. salesforce.com is up 37% since the start of 2017.
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