Brean Capital Raises Price Target but Remains Sidelined Following salesforce.com (CRM) Strong Q1

Brean Capital maintains a Hold rating on salesforce.com (NYSE: CRM), and raised the price target to $76.00 (from $70.00), after a "stronger-than-expected" Q1. CRM reported revenues of $1.51bn vs. the consensus of $1.50bn. Operating margins also beat consensus, coming in at 11.7% compared to estimates of 10.4%.

Analyst Sarah Hindlian commented, "Salesforce.com reported a stronger-than-expected Q1 and raised its FY’16 outlook. While implied Q2 billings guidance was weaker than consensus estimates, we had been anticipating this into the print and believed it was appropriate for the company to guide conservatively. Salesforce performed well in the seasonally difficult first quarter of the year with excellent execution by the company with Deferred Revenue growing 31% reported and 36% CC. We are subsequently raising our FV estimate from $70 to $76. However, we are not changing our rating at this time as we await a better entry point when M&A chatter has fully quieted."

Hindlian also added, "Salesforce.com guided Q2 revenues to $1.59-$1.60bn vs. cons. of $1.59bn, largely in line, with EPS guided to $0.17-$0.18 vs. cons. of $0.17. Similarly to Q1, deferred revenues were guided to mid to high 20’s%, which we assume implies roughly 28% Y/Y growth, or ~$3.017bn in total deferred revenues vs. consensus of $3.048bn. Our estimate of the company’s deferred revenue guidance implies total billings of $1.555bn at the midpoint of revenue guidance, or 15.5% Y/Y growth vs. consensus of $1.640bn in billings and ~21.8% Y/Y growth respectively. We had suspected the company would guide conservatively, given the potential disruption from M&A chatter, and we continue to highlight the Reported Billings are not a useful metric on a quarterly basis."

For an analyst ratings summary and ratings history on salesforce.com click here. For more ratings news on salesforce.com click here.

Shares of salesforce.com closed at $70.16 yesterday.

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