Salesforce.com (CRM) Still a

NEW YORK (TheStreet) -- Salesforce.com (CRM) has been reiterated as a "hold" with a ratings score of C, TheStreet Ratings team said Monday. 

Shares of the cloud-computing company are being hit hard on heavier-than-normal volume. By midafternoon, the stock had gapped 7.1% lower to $49.06. Trading volume of 13.5 million shares was more than double its three-month daily average of 6.1 million.

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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, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and generally higher debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 4.6%. Since the same quarter one year prior, revenues rose by 37.2%. 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 its closing price of one year ago, CRM's share price has jumped by 33.78%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • SALESFORCE.COM INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SALESFORCE.COM INC continued to lose money by earning -$0.40 versus -$0.48 in the prior year. This year, the market expects an improvement in earnings ($0.49 versus -$0.40).
  • 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 459.5% when compared to the same quarter one year ago, falling from -$20.84 million to -$116.62 million.
  • Net operating cash flow has declined marginally to $271.24 million or 3.67% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
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