NEW YORK (TheStreet) -- Shares of Salesforce.com (CRM) are higher by 3.73% to $72.78 in afternoon trading after KeyBanc Capital Markets increased its price target to $80 from $77 and reiterated its "overweight" rating for the San Francisco-based provider of enterprise cloud computing solutions.
Yesterday, Salesforce reported first quarter 2016 fiscal results, with net revenue of $1.51 billion, up 23% year-over-year, compared to KeyBanc's projection of $1.50 billion in net revenue for the quarter, according to the analyst firm.
The company reported non-GAAP net income of $4.09 million, earning 16 cents per share for the first quarter, above KeyBanc's EPS projection of 13 cents per share.
"Salesforce.com produced one of its cleanest quarters on record, leaving little room for naysayers," said KeyBanc analyst Brendan Barnicle. "Despite seasonality headwinds, Saleforce.com exceeded billings expectations, growing them over 21% y/y to $1.25 billion, better than the consensus estimate of $1.18 billion."
"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 increase in net income. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 1.5%. Since the same quarter one year prior, revenues rose by 26.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Powered by its strong earnings growth of 47.36% and other important driving factors, this stock has surged by 40.47% over the past year, outperforming the rise in the S&P 500 Index during the same period. 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 improved earnings per share by 47.4% in the most recent quarter compared to 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 reported poor results of -$0.42 versus -$0.40 in the prior year. This year, the market expects an improvement in earnings ($0.69 versus -$0.42).
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength 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.
- Despite currently having a low debt-to-equity ratio of 0.38, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that CRM's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.66 is low and demonstrates weak liquidity.
- You can view the full analysis from the report here: CRM Ratings Report