The shares of Salesforce.com, Inc. (NYSE: CRM) closed at $160.43, up 1.33% from the prior close after John DiFucci, an analyst at Jefferies, upwardly revised his price target for the stock to $189 from $172. The company’s Dreamforce event is currently going underway. DiFucci cited comments from Salesforce CEO, Marc Benioff, about “a macro environment that bodes well for enterprise software spending,” partly due to robust economic growth and a tax overhaul. Over the past 12 months, the stock has appreciated by nearly 70%.
Salesforce’ cloud business & reaffirmation of outlook
During the Dreamforce convention in San Francisco, the company revealed that its revenue is mainly driven by clients who use multiple cloud services. Chief Financial Officer, Mark Hawkins, also reaffirmed the company’s revenue outlook issued during the Investor Day. Salesforce continues to expect this year’s revenue of $13.18 billion to reach between $21 billion and $23 billion in fiscal 2022. Analysts surveyed by FactSet anticipate revenues of $13.17 billion in fiscal 2019.
The rise to $23 billion, according to the company, will happen partly due to clients who use multiple cloud products such as Service Cloud, Sales Cloud, and Marketing Cloud.
The CFO disclosed that 38% of its clients are multi-cloud customers, and Salesforce makes 92% of its revenue from that group, which allocates 10x more (on average) than the single-cloud product clients.
Commenting on the multiple cloud product clients, Mark Hawkins said: “This will power durable growth for years to come.”
Salesforce Deputy CFO, David Havlek, added that the manner in which Salesforce structures its sales via subscriptions gives confidence to the company in reconfirming the outlook. Havlek revealed that roughly 80% of the company’s revenue was generated through contracts at the start of the year. Specifically, about 60% of revenue is below two-year contracts.
The company announced a partnership with Apple (AAPL) last week, which will offer new apps to iPads and iPhones. The company’s CRM product Einstein uses artificial intelligence to offer predictions and suggestions based on the company’s customer data and business operations. At the Dreamforce event, Chairman and Co-Chief Executive, Marc Benioff, highlighted the Siri-enabled Einstein Voice, while delivering the opening keynote.
Similar to John DiFucci, Joel Fishbein, an analyst at BTIG stated that he was “impressed with the amount of top-line momentum at the company even after eclipsing $10 billion in revenue.” DiFucci has given a buy rating with a target price of $175 for the stock.
Fundamentally, the stock is, therefore, expected to remain bullish. Technically, the price chart indicates that the stock is trading above its 50-day moving average and the MACD indicator is making new highs. As a result, we can expect the stock to move up further.
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