Salesforce's Q3 May Prove It Doesn't Need Big Acquisitions To Grow

The solid quarterly results of salesforce.com, inc. (NYSE: CRM) may prove that the enterprise software company doesn’t always need acquisitions to boost growth.

Richard Davis of Canaccord Genuity feels the software sector, including Salesforce, could witness a rally in the coming weeks if Autodesk, Inc. (NASDAQ: ADSK) and Workday Inc (NYSE: WDAY) also come out with good prints.

“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 largecap growth software companies. BUY,” Davis wrote in a note.

Salesforce reported third quarter revenue and non-GAAP EPS of$2.145 billion and $0.24, which were respectively $20 million and $0.03 ahead of Canaccord estimates. Salesforce sees 2018 revenue to grow 21 percent, as the company is expected to surpass the $10 billion revenue mark.

“Using the company's own growth/margin framework, we would expect this growth to be accompanied by 100-300 bps in operating margin expansion. Our current estimates have revenue at $10.15B, which is at the high end of preliminary guidance, with 150 bps,” Davis added.

Davis has a price target of $95 on Salesforce, which, at last check, grew 3.25 percent to $77.63.