Salesforce.com (CRM) topped off its stronger-than-expected results for the 2017 third quarter with a positive 2018 forecast.
After Thursday's closing bell, the cloud computing company posted adjusted earnings of 24 cents per share on revenue of $2.14 billion. Wall Street was looking for adjusted earnings of 21 cents per share and $25.2 billion in revenue.
Salesforce has had a long-standing goal of reaching $10 billion in revenue. In its latest earnings, the company set forth a timeline for that goal, saying it expects revenues in 2018 to increase 21% year-over-year to between $10.1 billion and $10.15 billion.
The company also issued upbeat guidance for the 2017 fourth quarter and full year.
Shares of Salesforce were gaining 3.4% Friday morning to $77.77 following the results.
Here's a look at what some Wall Street analysts had to say about the quarter:
Karl Keirstead, Deutsche Bank (Buy, $90 PT)
"Coming after a negative 2QF17 print and Twitter-related anxiety, merely posting a clean quarter with an in-line or better guide is enough to restore confidence. The 4QF17 deferred revenues and revenues guide implies 25% billings growth, an acceleration from the prior two quarters of 15%-20% growth. The 2QF17 print is now indeed looking more like a bump in the road. The unbilled backlog growth was consistent with prior quarters, indicating no unusual change in bookings momentum."
Richard Davis, Canaccord (Buy, $95 PT)
"We suggested in our preview note that given our positive view on the firm's fundamentals, the pre-print decline in CRM shares seemed to have de-risked the stock. This played out last night with a beat and essentially in-line guide for calendar 2017. We always thought the 'they're considering M&A to hide declining core growth' argument failed the test of logic. If we get a series of good prints two weeks from now from some other titans of software such as Workday and Autodesk, it could be game on for a broader software rally - in which case CRM would almost certainly participate. If instead, this quarter brings us a back and forth tape for this sector (as is our expectation), then our advice is that investors use any pullback to build out a full position in one of the top handful of large cap growth software companies."
Kevin Buttigeig, MKM Partners (Buy, $98 PT)
"While F3Q17 billings expectations were quite low at 14% Y/Y growth, CRM outperformed it by a wide margin with 19% growth. We estimate that growth excluding acquisitions and FX was again north of 20%. The improvement was attributed to sales execution and a surge in large deals. F3Q17 was a record quarter for 7-figure deals, which is amazing to us considering the large deal strength of CRM's fiscal fourth quarter...This is a reversal of recent rends that had more deals being done at the end of the fiscal year, and was attributed to a change in the sales motion following the F2Q17 miss...After underperforming in 2016, CRM's stock now seems poised for better days ahead, in our view."
John DiFucci, Jefferies (Hold, $80 PT)
"Management attributed solid performance to enterprise execution and large deals across all geos and industries, which led to a record Q for seven-figure deals. Financials were particularly strong; two large deals noted were PNC Bank and Citi. An add-on deal with Amazon was also noted. Though we believe the midmarket was somewhat soft for the 3rd straight Q, there was no mention of this on the call. Perhaps this reflects the broad platform that CRM enjoys with strength in one area can offset weakness in another. But we wonder if competitive pressure in the mid-market from Microsoft is an issue."
Raimo Lenschow, Barclays (Overweight, $89 PT)
"We continue to believe that CRM is a premium asset but does not trade with a premium. At close to 5.0x EV/CY17 sales, Salesforce is trading at the bottom of its historical range. As investors begin to look to CY18 comps, those multiples look even more attractive at 4.5x EV/CY18 sales. Cash flow is also progressing nicely, as we forecast the company hitting its $2bn target this year. We still see this as an attractive entry point."
Brent Bracelin, Pacific Crest (Overweight, $95 PT)
"We believe Salesforce.com can grow above 20% y/y, even at $9 billion revenue run-rate. The App Cloud, Marketing Cloud and Commerce Cloud could drive longer-term upside and are not fully appreciated by investors, in our view, so they could also drive multiple expansion. CRM trades at a discount to its software-as-a-service (SaaS) peers."
Keith Bachman, BMO Capital Markets (Outperform, $90 PT)
"Compared to the relatively weak July Q, we thought there was a lot to like in salesforce.com's reported October Q and FY18 guidance. Most importantly, reported billings grew 19% y/y, and we calculate that organic CC billings grew by about 21%...We had projected that reported billings grow by ~15%, though we stated in our preview that we saw upside tension to our estimates."
Brian Schwartz, Oppenheimer (Outperform, $95 PT)
"We think the good quarterly reported results and guidance, subsequent to the disappointing results last quarter, should improve the sentiment on CRM over the near-term from somewhat alleviating pressures from rising growth concerns on the name. F3Q results increase our comfort in CRM's growth trajectory as a secular winner and its long-term potential."