Enterprise software company Salesforce.com’s “consistently strong” enterprise growth and customer demand will propel shares up more than 20 percent, according to one top Wall Street firm.
Jefferies upgraded Salesforce to buy, saying it may benefit from less pressure from rivals as well as acceleration in its commercial customer segment.
“We see many engines of growth for the company over the long-term as it continues to expand in multiple segments,” wrote analyst John DiFucci on Thursday. “The company’s customer-centric and vertical-focused approach to enterprise penetration has been key to its success, which we expect to continue into the future.”
In addition to the upgrade, the analyst raised his price target on the software company to $132 from $97, implying that clients could see as much as 21 percent upside to shares in the next year. DiFucci added that his bullish call on Salesforce is likely supported by better-than-expected fourth-quarter sales performance.
Shares of Salesforce rallied 2 percent in premarket trading; the stock is up 33 percent in the past 12 months.
The analyst anticipates new subscription annualized contractual value – a key metric for the company – was likely robust across all regions and should result in 23 percent billings growth. DiFucci was also quick to point out that relaxed competitive pressure is also a positive for Salesforce.
“Heightened competitive pressures from Microsoft, which we started observing in the August quarter of 2016 for five survey rounds, may have waned for a couple of quarters,” DiFucci wrote. “In five consecutive survey rounds starting in the August-ended 2016 quarter, we had observed a
significant uptick in the percentage of surveyed partners that indicated Microsoft is Salesforce.com’s biggest competitive threat, to about 70 percent or higher, versus 60 percent or lower in historical survey rounds. Since last quarter, however, that percentage dipped has below 60 percent again.”
Salesforce will report fourth-quarter earnings on Feb. 28.