Buy salesforce.com (CRM) on Pullback Following Q3 Results, Says Goldman Sachs

Goldman Sachs maintained a Conviction Buy rating on salesforce.com (NYSE: CRM) with a price target of $74. Comments follow Q3 result. Analyst Heather Bellini said use the pullback to add to positions.

"At $58 in the aftermarket, CRM is trading at an EV of 39x CY15 forecasted FCF of $1.46 per share (prior $1.39). We would use the pullback to add to positions and maintain our CL-Buy and $74, 12-month price target (DCF, EV/sales, EV/FCF)," said Bellini.

"Deferred revenue on a reported basis grew 28% yoy to $2.22bn (consensus $2.27bn or +31% yoy), which compares to management’s guidance of ~30%. That having been said, the yoy currency headwind to deferreds was $33mn, implying constant currency deferred growth of 31% on a year over year basis (32% constant currency growth in F2Q15). While reported billings growth for the quarter was 23%, or $1.25bn (consensus +26% or $1.29bn) constant currency growth was 27%. This compares to implied guidance for 25% billings growth and organic constant currency growth of 32% last quarter," continued the analyst.

"As is typical, CRM offered up its initial take on FY16 revenue growth, with revenues forecasted to increase 20-21% yoy on a reported basis and with currency representing a $125-150mn yoy headwind (230-280bps), this implies constant currency revenue growth of ~22-24%. For FY16 non-GAAP operating margins, we are conservatively modeling 110bps of expansion to 11.6% versus the consensus figure of 11.9%," she said.

For an analyst ratings summary and ratings history on salesforce.com click here. For more ratings news on salesforce.com click here.

Shares of salesforce.com closed at $61.02 yesterday.

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