(CRM): Analysts are Bullish, But be Cautious

07:21 03/08/2019 Inc. CRM  may soon be a buy on weakness.


The company just posted earnings that most investors would love.  


EPS came in at 70 cents a share in the fourth quarter, which was 15 cents above expectations.  It earned $2.75 a share for the full-year.  Quarterly revenue was up 26% year over year to $3.6 billion, as compared to $3.56 estimates. Full-year revenue was up 26% to $13.28 billion.  


“We had another year of outstanding revenue growth, surpassing $13 billion in revenue faster than any other enterprise software company in history,' said Marc Benioff, chairman and co-CEO, Salesforce. 'As companies of all sizes turn to Salesforce, we're enabling them to put the customer at the center of their digital transformation through our intelligent Customer 360 platform. I've never been more excited about the opportunity ahead.'


'Our relentless focus on delivering innovation and customer success has fueled our growth and solidified our leadership in the enterprise,' said Keith Block, co-CEO, Salesforce. 'This is just the beginning, which is why we're now targeting $26 to $28 billion in revenue by FY23 – organically doubling our revenue again in the next four years.'


But all of that good news was overlooked when guidance hit.


Granted, its EPS forecast 60 cents to 61 cents falls short of estimates for 63 cents.  Revenue guidance of $3.67 billion to $3.68 falls short of $3.7 billion estimates.


But there’s not much to get upset about here, according to bullish analysts.


For example, analysts at BTIG note, “We sense some conservatism in the numbers given the company’s historical affinity for prudence,” said analysts at BTIG, as quoted by MarketWatch.  In fact, the firm still rates the stock a buy with a target price of $175 a share.


Canaccord Genuity reiterated its buy rating on the stock while raising its price target from $165 to $175 a share. It believes the company’s forecast to double revenue by fiscal 2023 is possible.


Barclays maintained its overweight rating on the stock and raised its price target from $172 to $180 a share.  Deutsche Bank maintained its buy rating with a $185 target.  Oppenheimer maintained an outperform rating with a $180 target, as well.


'While the F4Q results and F1Q guidance may not have lived up to high investor expectations, we believe is executing very well and see the F4Q business metrics combined with a higher FY2020 revenue outlook lending good support to our thesis that's business can continue producing steady share gains, durable growth, and increasing cash flow, even in a slowing economy,' Oppenheimer noted.


In our opinion, the guidance is conservative at best.  


However, we’d wait for all of the fear to be priced in first.  At the moment, the stock is struggling at its 50-day moving average.  Should it fail at that point, we could see a potential test of the 200-day at $144.04.  We must also consider we may continue to see further profit taking, as the stock fails and pivots from double top resistance.


Wait for the stock to bottom out before taking a position.

This article has been provided by a Chasing Markets contributor. All content submitted by this author represent their personal opinions, and should be considered as such for entertainment purpose only. All opinions expressed are those of the writer, and may not necessarily represent fact, opinions, or bias of Chasing Markets.
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