Up Nearly 50% This Year, Is There Still Upside In Salesforce?

Salesforce.com, inc. (NYSE: CRM) reported its first look into fiscal 2019. The company guided its fiscal 2019 revenue to be in a range of $12.45 billion to $12.50 billion which implies a 20 percent growth rate.

The Analyst

William Blair's Bhavan Suri.

The Rating

Suri maintains an Outperform rating on Salesforce's stock.

The Thesis

Salesforce's fiscal 2019 guidance for a 20 percent revenue growth rate is "impressive" for a company that generates more than $10 billion in revenue and also manages to boost margins by 100 to 200 basis points each year, Suri said in a report. As such, investors should be find Salesforce's initial look into fiscal 2019 positively, especially when considering that the guidance is likely conservative given the large magnitude of 2017's revenue beat of $340 million at the midpoint and expectations for a $270 million beat at the mid point in 2018.

Salesforce's stock also boasts multiple drivers ahead, including traction in the enterprise segment as well as the Analytics Cloud and Commerce Cloud segments. Moreover, the stock is attractive at just 6.1 times enterprise-value-to-revenue, which is a discount to the SaaS group median of 8.1 times.

Investors should remain "long-term buyers" based not just on an attractive valuation, according to Suri, but the large total addressable market, an excellent management team and market position.

Price Action

Shares of Salesforce hit a high of $105 early Tuesday morning, but were trading around $102.40 at time of publication. The stock has gained about 49 percent, or $34 per share in 2017.

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