Salesforce.com Inc (NYSE:CRM) stock continued to advance on Wednesday after the software group surprised on earnings expectations for its fiscal third-quarter. The results from Salesforce were watched closely as Wall Street has become somewhat uncomfortable about cloud and technology giants in general.
Shares climbed in after-hours trading on Tuesday and held onto their gains in Wednesday's pre-market session, jumping by 8.2% to $138.01 before the opening bell.
The software company posted earnings of $0.61 per share on revenue of $3.39 billion, gliding past the Street's estimates.
The company was expected to report EPS, or earnings-per-share of 0.50 cents on revenue of $3.37 billion, based on a FactSet survey of 37 analysts.
Baird analyst weighs in
Impressed by the results, Baird analyst Rob Oliver called Salesforce.com a top "large-cap pick", saying he had conviction in the stock at "current levels".
"Salesforce is the leader in Cloud SAAS and is well positioned to expand its footprint within enterprises as the company looks to transform all aspects of its business to digital," Oliver wrote in a note to investors.
"The company is aggressive in evolving its product portfolio into new growth areas, both organically and through acquisition," Oliver added.
Despite sticking to an Outperform rating, Oliver did lower his price target on the stock to $165 from $180 to take into account the recent pullback in software as a service (SaaS) comparative group valuations.
On top of this, Oliver pointed out that Salesforce will likely need to acquire companies to hit its long-term target of $20B in revenue. "While the company has a strong track record of buying and integrating good businesses, for an acquisition to have a material impact on the business at the current run rate, it would have to be large," Oliver said.
"This opens the door to riskier deals that present greater integration risk," he noted.
Outlook in focus
Salesforce also posted fourth-quarter revenue guidance of $3.55 billion to $3.56 billion, zipping past the $3.52 billion consensus estimate.
For fiscal 2019, Salesforce projected revenue between $13.23 billion and $13.24 billion with non-GAAP earnings of $2.60 a share to $2.61 a share.
"Every company in the world has a mandate to digitally transform its business. We continue to see this in Q3 with strong performances across every industry, every market segment and every geography," said co-CEO Keith Block.
"We grew 25% in the Americas, 26% in APAC and 31% in EMEA in constant currency. In Q3, a number of deals generating more than $1 million was up 46% over last year, and the number of $20 million-plus relationships we have continues to grow significantly. In the quarter, we renewed and expanded a 9-figure relationship with one of the largest financial services institutions in the world."
The company raised its fiscal 2019 revenue guidance to $13.23 billion to $13.24 billion, with its fiscal year 2020 revenue guidance of $16 billion.
Contact Katie Lewis at katie@proactiveiinvestors.com
Follow her on Twitter @kelewis