Salesforce Earnings Preview: Five-Star Analyst Bullish Into Print

Salesforce (CRM) is set to release its earnings this Thursday after market close, and ahead of the print RBC Capital analyst Alex Zukin has reiterated his buy rating on CRM, while slashing his price target from $230 to $210. With the stock up 9% year-to-date, his price target still indicates upside potential of 18%. Here’s what he’s looking for on Thursday:

The analyst has now adjusted his financial model for fiscal 1Q below the consensus expectation at $4.810B (+29% Y/Y) on increased conservatism for MuleSoft transactional revenues. Zukin also lowered his cRPO (current remaining performance obligation) estimates to $14.4B (+22%) below previous guidance for 23-24% growth.

“For the full year we reduce MuleSoft revenue growth (from +42% to +14%) and bookings estimates (from -5% to -9%). These changes move our FY21 total rev estimates of $20.735B (+21% Y/Y) which is below guidance but above consensus” the analyst writes.

Overall, he strikes a bullish tone, telling investors: “We are positive on CRM ahead of the company’s F1Q report, and while the company is not immune to global demand trends, we see Service Cloud, Commerce Cloud, Healthcare, FinServ and Contact Tracing driving bookings momentum.”

Zukin sees a meaningful opportunity for Contact Tracing + Service Cloud sales to the government and large enterprise, adding “Specific to the quarter, we heard of solid wins in HC and Fins with no evidence of desperation or material discounting at the end of the quarter.”

He also believes the company has instituted a 2x SPIF (double commissions) on all deals signed in F2Q. Given current valuation of ~6x CY21E revenue vs. high efficiency peers at ~16x CY21E revenues and ~37x FCF, we like the risk/reward, the analyst concludes.

Based on the last three months of ratings, Salesforce boasts a Strong Buy analyst consensus with 23 buy ratings vs just 3 hold ratings and 1 sell rating. Meanwhile the average analyst price target works out at $194, indicating upside potential of 9%.(See CRM stock analysis on TipRanks).

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