BTIG Affirms (CRM) at 'Buy'; Q2 Results May Draw Questions, but L-T Targets Remain in Focus

September 1, 2016 7:10 AM EDT
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Price: $76.94 +1.02%

Rating Summary:
    51 Buy, 7 Hold, 1 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 18 | Down: 18 | New: 11
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BTIG affirms (NYSE: CRM) at Buy with a price target of $100 following the company's Q2 results on Wednesday night.

Analyst Joel Fishbein noted, While Salesforce delivered an in-line 2Q print on most metrics, investors will debate the full implications of the underwhelming billings performance and guidance. Specifically, billings grew only +15% y/y, with softness in the U.S. driving the first mid-teens growth rate since F1Q14. Similarly, guidance implies further billings deceleration to +12% y/y in F3Q. We think this can partly be attributed to the seasonality of the business, as 1Q and 3Q typically show the largest sequential declines, while the post-Dreamforce 4Q notably outperforms with the strongest growth of the year.

Fishbein also said, All eyes shift to Dreamforce in early October with the release of Einstein and discussion around long-term targets. The company has invested heavily in artificial intelligence (six deals in the past 12 months), and they believe imbuing their platform with machine learning will be the next catalyst for sustained growth. From a numbers perspective, the company did raise its revenue guidance a bit, implying ~25% y/y growth. Longer term, despite the billings deceleration, we’re comfortable with our 21% revenue CAGR and 19% billings CAGR over the next three years. We believe near term that innovations (the introduction of Einstein) will drive better growth in the U.S., just as international growth rates (~25% of the business) accelerate into the low-30%s (on a constant currency basis).

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