salesforce.com (CRM) Bullish Stance Reiterated BofA/Merrill Lynch on Strong Fundamentals
BofA/Merrill Lynch analyst Kash Rangan reiterated a Buy rating and $73 price target on salesforce.com (NYSE: CRM) following Q2 results noting several key metrics came in above the magic number of 30; revenue grew 38%, reported billings grew 33%, off BS backlog grew 32%, cash flow grew 34%.
Rangan reiterates his Buy rating citing six reasons. (1) A new “major” cloud to be announced at Dreamforce could help sustain 25-30% growth; (2) Annualized subs revenue growth is healthy across all clouds: Sales +25%, Service +37%, Marketing +48%, Platform +46%; (3) Reported billings grew 33% y/y, while adjusted organic CC billings grew 26-28% (assuming ET deferred revenues increased q/q from 0 to $20mn), which we find respectable. (4) Backlog of $7.35bn is 24% higher than next 12 month revenues.Bookings, which is a forward indicator of revenue growth, grew in-line with reported billings at 33% y/y as off-BS deferred revs grew 32% y/y. (5) Cash flow beat estimates driven by op. margin leverage. (6) Op. margin is up q/q from leveraging healthy growth rate and low attrition, which remained in ~9% range.
The firm raised FY 2015 EPS from $0.50 to $0.51, FY 2016 EPS from $0.65 to $0.67 and FY 2017 EPS from $0.83 to $0.84.
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Shares of salesforce.com closed at $55.71 yesterday.