With the stock already up more than 32 percent year-to-date, Salesforce.com (NYSE: CRM) may have very little margin for error when it reports its second-quarter earnings after the closing bell this afternoon. However, Credit Suisse analyst Michael Nemeroff expects Salesforce will meet those Q2 expectations and will remain a solid long-term investment in the coming years.
Credit Suisse has been bullish on Salesforce since the firm initiated coverage on the stock with an “outperform” rating back in April. Nemeroff says it’s unlikely Tuesday’s report will impact that stance.
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“We believe Salesforce is well-positioned to achieve its $20 billion revenue target within the next four to five years, and given its current valuation, we view the risk-reward profile of CRM shares as attractive,” Nemeroff said in a recent statement.
On Monday, Nemeroff said he expects Salesforce to report Q2 numbers “in line to modestly above” consensus analyst estimates.
Credit Suisse is projecting revenue of $2.518 billion, up 23.6 percent from a year ago. The firm is also calling for earnings per share of 32 cents, in line with the company’s guidance of between 31 and 32 cents. Credit Suisse is anticipating billings of $2.141 million on deferred revenue of $4.665 billion.
Regardless of the market’s reaction to the quarter, Nemeroff says investors shouldn’t lose sight of the long list of positive catalysts Salesforce has on the horizon. Revenue growth of around 20 percent, expanding market share, major cross-selling and up-selling opportunities and rising operating leverage are all part of Credit Suisse’s bullish outlook.
“We estimate that CRM will continue to garner market share gains across its various cloud offerings over the next three years at least, which, coupled with disciplined expense management, should enable CRM to generate significant operating cash flow over time and drive the shares higher,” Nemeroff says.
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Salesforce stock is already up 7 percent since Nemeroff’s April initiation, but Credit Suisse’s $110 price target suggests even more upside ahead.
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What to Expect From Salesforce Earnings originally appeared on usnews.com
