Markets / Stocks

Salesforce.com Price Target From RBC Boosted to $146 From $130

Salesforce.com (CRM) received an increase to its price target from RBC Capital Markets after the customer-relations-management software company reported fiscal Q1 results above analysts’ expectations late Tuesday and increased its fiscal-year guidance even as its outlook for Q2 adjusted earnings per share missed the Street view.

The new price target from RBC is $146 per share, up from $130. The stock closed Tuesday’s session at $126.88 and rose 4.7% to $132.85 in recent Wednesday pre-market trading, boosted by the better-than-expected Q1 results. RBC kept its investment rating on the stock at outperform.

In a note to clients, RBC said it raised its estimates for Salesforce to reflect the impact of new accounting standards as well as the company’s acquisition this month of MuleSoft, a platform provider for building application networks.

“We’d describe F1Q19 results as good, with a beat across all line items and current Remaining Transaction Price
(RTP = future revenues under contract but not yet recognized) growth of 26%” year over year, the firm said. It noted the price-target boost came as the firm extended its estimates to fiscal 2021, with the new target reflecting a multiple of 25 times its estimate for fiscal 2021 free cash flow.

For its fiscal Q1 ended April 30, Salesforce reported adjusted earnings per share of $0.74, more than double the year-earlier period’s $0.29. The company noted mark-to-market accounting of its strategic investments boosted the latest quarter’s adjusted EPS by $0.22 per share; excluding that impact, its adjusted EPS would be $0.52, still above analysts’ mean estimate according to Capital IQ of $0.46. Revenue rose to $3.01 billion, up from $2.40 billion a year earlier and surpassing analysts’ mean estimate according to Capital IQ of $2.94 billion.

For fiscal Q2, Salesforce forecast adjusted EPS of $0.46 to $0.47 and revenue of $3.22 billion to $3.23 billion. While the guidance for Q2 adjusted EPS is below analysts’ mean estimate heading into the report for $0.52, the revenue outlook is above the Street’s then-consensus view of $3.11 billion; the analysts’ mean estimates have since been adjusted to $0.47 and $3.23 billion, respectively.

For fiscal 2019, the company now sees adjusted EPS of $2.29 to $2.31 and revenue of $13.08 billion to $13.13 billion, up from its prior guidance for adjusted EPS of $2.02 to $2.04 and the revenue of $12.6 billion to $12.65 billion.