What Wall Street Thinks About Salesforce's Q2 Earnings

Salesforce.com, inc. CRM hit a new all-time high of $94.63 Wednesday after the company managed to report a top and bottom-line beat in its second-quarter earnings.

With the stock up more than 35 percent since the start of 2017 alone, are analysts optimistic there is room for further gains?

Barclays: Typical Report

Salesforce's earnings was "typical" and characterized by a better than expected revenue and billings but expectations for increased seasonality, Barclays' Raimo Lenschow commented in a report. The guidance limits upside in third-quarter billings and also dampens hopes for margin improvements as the company also reiterated its focus on growth investments.

Nevertheless, the long-term bullish story remains unchanged and consists of healthy growth at scale and "sub-optimal" margins that have the potential to improve over time. As such, the short-term outlook for upside in the stock will be muted as expectations were high for a margin guidance increase.

Shares remain Overweight rated with a price target slightly boosted from $100 to $101.

See Also: Marc Benioff Talks Earnings: It's All About CRM And Salesforce Is Leading The Way

Citi: Clean Beat

Salesforce's report was a "clean beat across the board" but the deferred commission math implies a "strong rebound" in new business, Citi's Walter Pritchard commented. In fact, the math suggests a 40 percent year-over-year growth versus a 4 percent decline a year ago.

Salesforce's guidance was also on the conservative side as the third-quarter implied billing guidance was $200 million below the Street's estimates and offset the $180 million upside in billings reported in the second quarter.

"With a familiar pattern of beat and lower and execution now solid for 4Qs, investors will likely give CRM a pass on the weaker 3Q18 billings guide with a trade-off being higher 4Q expectations," the analyst wrote.

Shares remain Buy rated.

JMP Securities: 3 Reasons To Remain Bullish

Salesforce "handily" delivered a revenue, billings and earnings beat in its quarter but the company's third-quarter billings guidance fell short of expectations, JMP Securities' Patrick Walravens commented in a report. This would explain why the stock initially dipped after the earnings release hit.

But the bullish case for Salesforce's stock remains unchanged for three reasons: 1) Salesforce will play a vital role with the Global 2000 companies with its digital transformations, 2) Salesforce's annual revenue run rate of $10 billion will overtime surge to $20 billion, and 3) heading into the 'Dreamforce' conference in November the stock could see some momentum.

Shares remain Market Outperform rated with an unchanged $95 price target but with further upside to $115.

Deutsche Bank: Modest Beat

Salesforce's overall "modest beat" was highlighted by a strong 26 percent in billings growth and a 30 percent unbilled backlog growth, Deutsche Bank's Karl Keirstead said. These two beats offset the weaker than expected deferred revenue growth guidance for the third quarter along with the absence of any positive margin improvements.

Overall, there weren't any aspects of the earnings report that would suggest a slowdown ahead.

Shares remain Buy rated with a price target boosted from $95 to $105.

Elsewhere On The Street

• Analysts at Jefferies maintains a Hold rating on Salesforce's stock with a price target boosted from $80 to $84.
• Analysts at Credit Suisse maintains an Outperform rating on Salesforce's stock with a price target boosted from $110 to $115.
• Analysts at Keybanc maintains an Overweight rating on Salesforce's stock with an unchanged $108 price target.