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Analysts are optimistic on Salesforce even after the stock drop. Here's what they had to say

Key Points
  • Many analysts raised their price targets on the stock.
  • Bernstein analyst Mark Moerdler said, "Overall, we believe this quarter was another solid one for the company."
  • BMO's Keith Bachman wondered if software stocks are "poised to take a breather."
Marc Benioff, Co-CEO of SalesForce speaking at the WEF in Davos, Switzerland on Jan. 22, 2019.
Adam Galica | CNBC

If analysts are worried about Salesforce's disappointing revenue forecast, they aren't showing it. Most remain bullish and undeterred after the company reported strong fourth quarter earnings after the bell on Monday.

Shares of the stock were down as much as 3 percent after the report but have rebounded slightly and are now down just over 1 percent in early trading to $155.94. However, Salesforce stock is also up a whopping 30 percent over the last year.

Salesforce CEO Marc Benioff said on, "Mad Money with Jim Cramer," that "I still have never been more excited about Salesforce than I am right now."

UBS analyst Jennifer Lowe noted the shares sold off after the lower first quarter revenue guidance and fourth quarter results "that were solid but didn't deliver the same level of blowout we saw last Q4."

The dip in Salesforce's stock continues a pattern Bernstein's Mark Moerdler has seen where four of his covered companies reported strong quarters but then sold off. "We believe this could be a signal of some investor fatigue in growth software given the run YTD and over the past few years," he said.

BMO's Keith Bachman wondered if software stocks are "poised to take a breather," noting recent "strong prints by Workday, Splunk and VMWare have been met largely with investor apathy, given current valuation levels."

"While the stock pulled back in the after hours, we continue to see CRM as one of the best positioned companies in software," said Goldman Sachs analyst Heather Bellini.

Deutsche Bank analyst Karl Keirstead reaffirmed his buy, raised his price target, and summed it up by saying, "impressive for a company about to hit its 20th birthday."

Here's what else the analysts are saying:

Bernstein- Market-perform rating, price target to $160 from $149

"The stock reacted somewhat poorly in the aftermarket, continuing a pattern we saw last Thursday where 4 of our covered companies reported strong quarters and have traded down somewhat significantly since... We believe this could be a signal of some investor fatigue in growth software given the run YTD and over the past few years... Beats and raises are expected, and net of MuleSoft, Salesforce decelerated a bit this quarter, albeit against a tough compare... This leaves us somewhat cautious on high-quality growth software stocks still to report this quarter... However, management's FY 23 guidance of $26-28B is impressive and suggests a 21% CAGR over the next 4 years.,,,Overall, we believe this quarter was another solid one for the company and while we continue to have long-term concerns regarding Salesforce's ability to expand its margin significantly as it decelerates, this quarter was another positive data point regarding its growth runway..."

UBS - Buy rating, price target to $190 from $180

"Shares traded off slightly in the aftermarket as investors digest the lower Q1 guide and Q4 results that were solid but didn't deliver the same level of blowout we saw last Q4 (when CRM beat billings consensus by 8%)... However, we continue to see CRM as offering a solid combination of secular growth, stable FCF, and defensible FCF -based valuation support and remain buyers here while our PT moves from $180 to $190 ... "

Goldman- Buy rating, price target to $179 from $178

"Expectations were clearly high heading into the print, and as evidenced by recent price action from other companies that have posted solid quarters (Workday, Autodesk, Elastic, etc) the bar was higher than actual results... While the stock pulled back in the after hours, we continue to see CRM as one of the best positioned companies in software... We reiterate our Buy rating and raise our 12-month price target to $179 from $178..."

Deutsche Bank- Buy rating, price target to $185 from $165

"Given the solid results and outlook, we're raising our PT from $165 to $185, based on an assumed FY21E FCF multiple of 34x, up from our prior estimate of 33x and fair given the 20%-25% growth outlook, rising margins and what appears to be conservative FY20 guidance...... impressive for a company about to hit its 20th birthday. We reaffirm our BUY rating..."

Morgan Stanley- Overweight rating

"A 4-year target of $26-28 billion in revenues, double the $13.3 billion reported in the most recent year, gains credibility from best in class positioning for digital transformation initiatives and the 23% billings growth seen in FY19... Three key factors bolster our confidence in the durability of Salesforce.com's growth longer-term: 1) Targeting a $200 Billion total Available Market,...2) Best in Class Positioning for digitalization initiatives,... and 3) the big get bigger in SaaS (software as a service)..."

BMO- Outperform rating, price target to $185 from $175

"We believe that software seems poised to take a breather, particularly growth software... For example, strong prints by Workday (Market Perform), Splunk and VMWare (both Outperform) have been met largely with investor apathy, given current valuation levels... With that said, we remain encouraged by salesforce's current and longer-term positioning, and thus are taking our target price from $175 to $185, while maintaining our EV/revenue target multiple of 7-8x... We believe that the challenge for Salesforce will be maintaining a cadence of beat and very modest raises... We note that our current FY20 forecast calls for ~20% organic growth, which we think has modest upside potential... "

J.P. Morgan- Overweight rating, price target to $180 from $150

"Net/net, Q4 was not a 'blowout' but represented a solid quarter reinforcing the steady growth trajectory of the business at scale and provides additional evidence that Salesforce offers exposure to attractive growth markets and consistently executes against its opportunity..."

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