This Analyst Isn't Feeling Too Confident In Salesforce

Jefferies raised its price target on salesforce.com CRM while maintaining a Hold rating following second-quarter results that reflected top-line momentum, with bottom line looking murkier.

Analyst John DiFucci raised the price target by $4 to $84. It was trading Wednesday at $94.20, up 1.34 percent.

Not Much Leverage In The Model

“CRM exceeded F2Q expectations for all metrics, and while F3Q billings guidance was below the consensus estimate (that implied unlikely strong seasonal trends), the F18 rev guidance raise by more than beat demonstrates mgmt's confidence in the future business,” DiFucci wrote in a note. “A question that remains is whether execution of this model is appropriate in its balance of growth and profit.”

The company raised fiscal year 2018 earnings per share from $1.30 to $1.31 and 2019 EPS from $1.64 to $1.68.

Top-line growth was strong “but what of the bottom line?” he said. “Management emphasizes further investment in the customer, but also modest margin improvement, and the benefits of scale, one of which should be leverage. We haven't seen much leverage in this model, especially given the scale. We believe most investors question this, as do we.”

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