Salesforce.com Plunges: What Wall Street's Saying

Updated from 10:30 a.m. to include information from JMP Securities.

NEW YORK (TheStreet) -- Salesforce.com (CRM) shares dropped sharply after the cloud computing company posted quarterly results that beat expectations, and gave 2015 guidance that was largely upbeat.

For the fiscal first-quarter, San Francisco-based Salesforce earned 11 cents a share on a non-GAAP basis, as revenue grew 37.8% year over year to $1.23 billion. Analysts surveyed by Thomson Reuters were expecting the company to earn 10 cents a share on $1.209 billion in sales.

"Salesforce.com had a strong start to its fiscal year.  We delivered 37% year-over-year growth in revenue, and 67% year-over-year growth in operating cash flow in the first quarter," said Marc Benioff, Chairman and CEO, in the press release. "Salesforce.com continues to be the #1 CRM platform, and is the fastest growing top ten software company in the world."

Despite the earnings beat, shares were trading lower Wednesday, falling 5.9% to $49.78.

For the second quarter, Salesforce expects revenue to be between $1.285 billion and $1.29 billion, up 34%-35% year over year, while non-GAAP earnings are expected to be between 11 cents and 12 cents a share.

Looking forward to the rest of fiscal 2015, Salesforce expects to earn between 49 cents and 51 cents a share, and raised its revenue outlook for the year. It now expects to generate between $5.3 billion and $5.34 billion in sales, up from a prior view of $5.25 billion to $5.3 billion. Analysts expect revenue of $5.29 billion for the year.

Analysts by and large were positive on the company and the quarter, though some expressed disappointment that the stock wasn't reacting the way it would in previous quarters, given the strong metrics. Here's what a few had to say.

TheStreet's Jim Cramer

"Can we at least stipulate that if Salesforce.com (CRM) had reported this identical quarter four months ago, the stock would be up about 10%? That's because while many look at order growth and revenue, the most relevant metric for those who want a semblance of profit is the operating cash flow stat, and that was up about a third more than even some of the biggest bulls were using. In other words, if you wanted to look at a profit metric, not a sales metric, this was truly an amazing quarter."

Canaccord Genuity analyst Richard Davis (Buy, $65 PT)

"We would build or expand positions in CRM shares because we believe this firm has the highest quality franchise among cloud software firms we follow. Meanwhile the stock's valuation looks reasonable at 35x 2015E EV/FCF for a 25-30% grower."

Oppenheimer analyst Brian Schwartz (Outperform, $71 PT)

"Consistent with our preview, CRM reported strong 1Q results and raised its guidance. We believe the key takeaways in 1Q were the growing bookings momentum (billings, backlog, deferred revenue each grew 34%+ y/y) and operating margin inflection. We also anticipate further upside potential to annual guidance given the backlog acceleration and ~35% LTM backlog growth versus the 30% to 31% FY:2015 growth target. Last, the guidance assumes faster 2H organic revenue growth (~26.5% versus ~25.5%), another indicator of sustainable business trends momentum.

Bottom Line: While questions about slowing demand for salesforce.com and sustainability of margin expansion have arisen over the past 3-6 months, we believe FY:2015 will be a year like 1Q with CRM delivering on or exceeding expectations."

Citigroup analyst Walter Pritchard (Buy, $71 PT)

Strong billings with good quality and growing, but controlled expenses held cash flow inline. Guidance suggests mid-20s billings growth is sustainable. We continue to believe CRM is consolidating share of the front-end apps space as customers re-platform their customer experiences. We did reduce our price target to $71 to reflect lower multiple for growth assets (terminal multiple moves from 20x to 18x)."

Deutsche Bank analyst Karl Keirstead (Buy, $65 PT)

"Salesforce.com (SFDC) grew billings by 35% in FY1Q15 (we estimate organic ex-ET billings growth of ~25%), versus what we believe to have been investor expectations for ~30%-32% growth. Total backlog growth was solid at 34% (consistent with momentum in recent quarters), the FY15 revs guidance was raised by $40m, SFDC reiterated guidance for 125-150bps of margin improvement in FY15 and the non-GAAP EPS guidance was nudged up slightly. Bottom line, this print reaffirms our confidence in the fundamentals (including the core SFA business and the recent sales changes) following our upgrade to a BUY rating a few weeks ago."

JMP Securities analyst Patrick Walravens (Market Outperform, $75 PT)

"Overall, we are pleased to see salesforce.com start the year off strong (F1Q last year was disappointing) and feel the company is set up well to achieve its goals for the rest of the year as the leader in enterprise cloud computing. We maintain our FY15 non-GAAP EPS of $0.51 (consensus $0.50), and maintain our FY16 non-GAAP EPS of $0.77 (consensus $0.70).
Our $75 price target implies a CY15E EV/free cash flow multiple of 36x, roughly in line with the company's revenue growth rate, and represents an CY15E EV/revenue multiple of 6.7x versus the overall SaaS peer group multiple of 4.9x and the high growth SaaS multiple of 7.4x."

--Written by Chris Ciaccia in New York

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