Salesforce's Inflection Point: Could It Become The Business Standard?

Brean Capital believes salesforce.com, inc. (NYSE: CRM) is at an inflection point to replace SAP SE (ADR) (NYSE: SAP) and Oracle Corporation (NYSE: ORCL) as the “de facto” standard in enterprise business apps, as all “large global system integrators have begun to invest significantly in Salesforce practices and are actively pitching Salesforce solutions over others.”

Move Over SAP, Oracle

This is evident from the fact that the company closed record number of seven-figure+ deals and closed seven large financial services customers in its third quarter, leading to better-than-expected numbers and an upbeat forecast.

“We highlight that the company has benefited from strategically positioning its product strategy around front-office, customer-facing, revenue-generating solutions, which our checks indicate is becoming an increasing focus of large corporations,” analyst Yun Kim wrote in a note.

Platform Product Gains

As in the past, salesforce saw fastest growth in platform product segment, which now represents almost 20 percent of revenue. Kim pointed out that this suggests a growing ecosystem around salesforce and key system integrators building their own value-added solutions around salesforce’s core products.

Salesforce’s net new deferred commissions, an indication of bookings trend, rebounded to 16 percent growth in the third quarter from flat growth a quarter ago.

A Word Of Caution, But Maintaining At Buy

“However, we note that with increasing deal size, the company's business becomes more backend loaded and its quarterly sales execution risk increases,” Kim noted.

That said, Kim maintains Buy rating, with a price target of $110, saying that salesforce is the “best positioned” vendor to benefit from favorable spending trend towards front-office, customer-facing and revenue-generating initiatives.

Shares of salesforce closed Thursday’s trading at $75.19. At Friday's open, shares were up 6.26 percent at $79.90.