Why Signs Point to Salesforce.com Upside

NEW YORK (TheStreet) -- Despite concerns about insider selling, a sky-high earnings multiple, and competition on all fronts, analysts believe there is significantly more upside to salesforce.com (CRM).

Cloud computing specialist salesforce.com has gained 51.89% year-to-date, and several analysts, including Credit Suisse's Phillip Winslow believe there is more room to run, as revenue is poised to accelerate in the coming years.

Winslow upgraded salesforce.com to "buy" on Friday, raising his price target to $185 from $145 due largely to a massive technology refresh cycle. "Propelled by replacement and expansion cycles across B2B and B2C implementations, we expect the CRM market to offer the greatest incremental revenue growth opportunity for software vendors over (at least) the next three to five years," Winslow wrote, in his research note.

San Francisco-based salesforce.com competes with technology giants such as Oracle (ORCL), Microsoft (MSFT) and SAP (SAP), but none of these companies has been able to overtake Marc Benioff's company in the lucrative world of cloud computing.

Salesforce has continued to innovate, and expectations are riding high heading into the company's first-quarter. Analysts polled by Thomson Reuters are looking for earnings of 34 cents a share on $678.05 million in revenue. Excluding items, Salesforce earned 28 cents a share and generated sales of $504.36 million in the same period last year.

Deutsche Bank analyst Tom Ernst Jr. noted that Salesforce recently announced the Government Cloud, as the company continues to innovate and bring cloud computing to both the public and private sectors. "We believe this is another positive step in overall public cloud adoption, as SFDC [salesforce.com] continues to gain referenceability within the public sector, it becomes an easier sale to private enterprises," Ernst wrote in his research report. He rates salesforce "buy" with a $215 price target.

Salesforce.com is one of TheStreet's three tech stocks for 2012.

TheStreet Ratings rates salesforce.com "hold".

Salesforce is also harnessing the power of social networking for the corporate realm. In 2011 salesforce.com unveiled its Radian6 social monitoring cloud which aggregates data from the likes of Facebook, Twitter and YouTube.

Not all is rosy for salesforce.com which trades at 75 times expected 2012 earnings. Even Deutsche Bank's Winslow notes the high valuation, trading at a revenue multiple of 144.1% of the sector.

There has been a slew of option exercises and share sales in recent weeks, as the stock continues to climb. Just in the month of April, there were ten transactions by insiders exercising over 50,000 shares as the stock has continued to climb.

Shares of salesforce.com are down sharply this morning, off 2.23% to $154.01.

Interested in more on salesforce.com? See TheStreet Ratings' report card for this stock.

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--Written by Chris Ciaccia in New York

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