Salesforce.com (CRM) is set to report quarterly earnings after the close Wednesday, as the software company continues to expand its product offerings and pose a greater threat to business-software leaders Oracle (ORCL) and SAP (SAP).
Salesforce is a pioneer developer of customer relationship management software made available to business customers via the cloud as a software-as-a-service. The company has made several acquisitions this year that has raised questions about earnings dilution. In July, Salesforce.com acquired startup Quip for about $582 million in stock, stepping up competition with Microsoft (MSFT). And in May, Salesforce.com bought e-commerce platform Demandware for $3 billion.
The consensus is for Salesforce.com to report revenue of $2 billion, up 23% year over year, for the quarter ended on or near July 30. That's a slowdown from growth of 27% in the preceding quarter. Excluding one-time items, the consensus on earnings per share is 22 cents, up 16%.
Brean Capital analyst Yun Kim has a buy rating on Salesforce stock, with a price target of 110.
"We are expecting Salesforce.com to report at least in-line Q2, driven by continued strength in its enterprise business and increasing traction with large global system integrators," Kim wrote. "Our checks indicate that Salesforce is beginning to replace SAP and Oracle as the de facto standard status in enterprise business applications, which is reflected in large global system integrators aggressively building out their Salesforce practices."
BMO Capital Markets analyst Keith Bachman has an outperform rating on Salesforce and price target of 98.
"Though we think revenue and billings upside this quarter could be less than in recent quarters, which includes the impact of foreign exchange, we believe that longer-term potential and valuation are compelling," Bachman wrote in a research note.
Salesforce stock closed Friday at 80.03, down a fraction for the day but rising 3.3% for the week.
IBD'S Take: Salesforce has a strong IBD Composite Rating of 91, meaning it has outperformed 91% of stocks in the past 12 months. Salesforce has rebounded 52% from a 52-week low of 52.60 on Feb. 8. But it's down 5% from an all-time high of 84.48 set on May 27. IBD University can help you to Read Stock Charts and identify chart patterns, bases and buy points.
Among analysts polled by Thomson Reuters, 17 have a strong buy rating on Salesforce.com stock, while 25 rate it a buy, two a hold, with one a sell.
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