Earlier this year, Pacific Crest estimated that public spending on cloud computing could grow from $58 billion to an incredible $205 billion annually within the next three years. Those types of growth opportunities for investors are few and far between, but choosing the best cloud stock can be a difficult task.
While Amazon.com (ticker: AMZN) and Microsoft Corp. ( MSFT) typically dominate the cloud services headlines, Pacific Crest analyst Brent Bracelin just named Salesforce.com ( CRM) a top cloud stock pick of 2017.
According to Bracelin, Salesforce is uniquely positioned in the artificial intelligence space, which sets its services apart from competitors.
[See: Artificial Intelligence Stocks: 10 Companies Betting on AI.]
Just this week, Salesforce launched Einstein, which the company describes as “artificial intelligence built into the core of the Salesforce platform.”
Bracelin says Einstein was the centerpiece of Salesforce’s recent fiscal 2018 kickoff event. Executives from both Coca-Cola ( KO) and Amazon Web Services spoke about the ways Einstein is optimizing business.
“Salesforce is enabling meaningful operational improvements at these global companies, which is a testament to how Salesforce leverages data and artificial intelligence in unique ways,” Bracelin says.
Because the benefits of Einstein increase as large customers adopt more and more of Salesforce’s solutions, Bracelin believes the technology could generate some serious positive momentum for the company.
In addition, he sees Salesforce’s Einstein and International Business Machine’s ( IBM) Watson as a powerful one-two punch for businesses. Because Einstein’s strength is its massive database of individual data and Watson specializes in structured and unstructured industrial data, dual customers could potentially enjoy the best of both worlds.
Despite recent strength in the stock, Pacific Crest sees plenty of upside ahead for Salesforce.
“The current valuation of 5.5x enterprise value-sales and 25.7x enterprise value/EBITDA remains favorable for one of the largest cloud application platforms in the world,” Bracelin says.
[See: 7 Things Fund Managers Ask Company Managers.]
Pacific Crest maintains an “overweight” rating and $95 price target for Salesforce stock. In addition, the firm has named Salesforce a “favorite cloud stock” for 2017.
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Pacific Crest Names Salesforce.com (CRM) Its Top Cloud Stock for 2017 originally appeared on usnews.com
