Salesforce shares rise after Jefferies upgrades stock, predicts 20% rally

Key Points
  • Jefferies upgrades Salesforce to buy, increasing the price target on the company to $132 thanks to strong enterprise growth.
  • Analyst John DiFucci's new target represents 21 percent upside over the next 12 months.
  • The analyst says surveys show it is winning customer favor back from competitor Microsoft.
  • Salesforce will report fourth-quarter earnings on Feb. 28.
A woman walks past signage at the DreamForce Conference in San Francisco, California.
Noah Berger | Bloomberg | Getty Images's "consistently strong" enterprise growth and customer demand will propel shares by more than 20 percent, according to one top Wall Street firm.

Jefferies upgraded the enterprise software company's stock to buy, saying it may benefit from less pressure from rivals as well as acceleration in its commercial customer segment.

"We see many engines of growth for the company over the long-term as it continues to expand in multiple segments," analyst John DiFucci said in a note Thursday. "The company's customer-centric and vertical-focused approach to enterprise penetration has been key to its success, which we expect to continue into the future."

In addition to the upgrade, the analyst raised his price target on the software company to $132 from $97, implying that clients could see a 21 percent rise in share prices in the next year. DiFucci added that his bullish call is likely supported by better-than-expected fourth-quarter sales performance.

Shares of Salesforce rallied 3.76 percent Thursday; the stock is up 38.5 percent in the past 12 months.

The analyst anticipates new subscription annualized contractual value — a key metric for the company — was likely robust across all regions and should result in 23 percent billings growth. DiFucci was also quick to point out that relaxed competitive pressure is a positive.

"Heightened competitive pressures from Microsoft, which we started observing in the August quarter of 2016 for five survey rounds, may have waned for a couple of quarters," DiFucci wrote. "In five consecutive survey rounds starting in the August-ended 2016 quarter, we had observed a significant uptick in the percentage of surveyed partners that indicated Microsoft is's biggest competitive threat, to about 70 percent or higher, versus 60 percent or lower in historical survey rounds. Since last quarter, however, that percentage dipped has below 60 percent again."

Salesforce will report fourth-quarter earnings on Feb. 28.