Barclays On Salesforce: An Interesting Set Up Ahead Of Dreamforce

Although investor sentiment for salesforce.com, inc. CRM has “weakened significantly in recent months,” the company’s growth is expected to reaccelerate in the back half of FY17, Barclays’ Raimo Lenschow said in a report. He maintained an Overweight rating on Salesforce, with a price target of $89

“We believe Salesforce is worth a fresh look ahead of next week's Dreamforce conference and analyst day,” analyst Lenschow commented.

Shares came under pressure after Salesforce’s Q2 results came in slightly short of expectations and on news of the company considering a bid for potential Twitter Inc TWTR; and the stock is currently trading at the lower end of its 10-year trading range.

Growth Trajectory Intact

Salesforce's billings growth decelerated to 15 percent in Q2 and guidance for Q3 is at 12 percent, which is below the trend line. Lenschow mentioned, however, that investors should consider “multi-quarter numbers to also adjust for the above trend results in Q1 FY17 and Q4 FY16.”

Considering the growth rates in the first half and implied guidance for the second half, the company still seems to be growing in the low 20 percent range, in-line with previous expectations, the analyst noted.

Thoughts On Twitter

While investors have been concerned about Salesforce potentially acquiring Twitter, Lenschow commented that this was unlikely. He stated that while the business rationale for acquiring LinkedIn Corp LNKD was very strong, as the platform offered access to 400 million business users, Twitter “does not have these characteristics and hence seem like a much more unlikely deal.”

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