The firm said the company is facing increased competition, which could weigh on valuation.
The stock closed at $56.73 on Wednesday.
Separately, TheStreet Ratings team rates SALESFORCE.COM INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate SALESFORCE.COM INC (CRM) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in stock price during the past year and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and generally higher debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 11.5%. Since the same quarter one year prior, revenues rose by 37.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Software industry and the overall market, SALESFORCE.COM INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 179.7% when compared to the same quarter one year ago, falling from $76.60 million to -$61.09 million.
- You can view the full analysis from the report here: CRM Ratings Report