When salesforce.com, inc. CRM reports after the close Feb. 28, it's likely to show billings upside in the fiscal year fourth quarter, with the company possessing multiple paths to achieve long-term targets, according to Jefferies.
The Analyst
Jefferies analyst John DiFucci upgraded Salesforce from Hold to Buy and increased the price target from $97 to $132, suggesting 21-percent upside from current levels.
The Thesis
Salesforce.com remains on track to report upside to Q4 estimates, DiFucci said. The company's new subscriber annualized contract value, a key gauge, is likely to increase modestly despite tougher year-ago comparisons, he said.
The ACV estimate suggests billings growth of 23 percent to $5.53 billion, which the analyst termed a conservative estimate given strong enterprise momentum and signs of moderating competition in the commercial segment.
"We've observed consistently strong enterprise traction over the last couple of years, further confirmed in our recent field checks, and commercial segment momentum seemed to improve recently, likely due to moderating MSFT competition," DiFucci said.
KeyBanc estimates 18-percent billing growth in the first quarter of 2019 against a 19-percent estimate. KeyBanc's fiscal 2019 revenue estimate of $12.698 billion is 1 percent above the high end of guidance and the consensus estimate of $12.540 billion.
A 2022 organic revenue target of $20 billion to $22 billion implies low to mid-teens growth in new subscriber annualized contract value, something DiFucci said is achievable.
The Price Action
At the time of writing, Salesforce.com shares were rallying 3.69 percent to $113.07.
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