Salesforce.com, Inc. (NYSE:CRM) is now rated Outperform at Wedbush. The firm previously rated the stock Neutral, a cautious rating that was predicated on Salesforce’s shrinking sales. In the latest move, Wedbush notes that Salesforce’s sales momentum has turned positive.
Not only has Wedbush upgraded rating for Salesforce.com, Inc. (NYSE:CRM), but it has also significantly sweetened its price target on the stock. The firm now has a 12-month price target of $96 for Salesforce, up from $79.
Reasons for optimism
Wedbush is particularly impressed by the work Keith Block (President) is doing at Salesforce. The firm notes that Block has been aggressive in systemizing enterprise sales processes and cross-selling for products such as ExactTarget at Salesforce. According to Wedbush, Block’s efforts can be seen boosting topline growth quarter after quarter, which make the firm more confident about the future of the company.
Not only are Block’s efforts boosting topline growth, but also driving margins expansion. On the issue of margins, Wedbush notes that Salesforce’s operating margins could stabilize above 30%, especially as costs associated with customer acquisition moderate as a percentage of revenue.
Wedbush is also of the view that Salesforce’s solutions such as App Cloud and Service Cloud have huge growth opportunity ahead. There is also opportunity for Salesforce to disrupt a software market valued at nearly $21 billion.
There are speculations that Salesforce.com, Inc. (NYSE:CRM) in in talks to acquire SteelBrick, a provider of configure-price-quote (CPQ) solutions. If the two companies are truly in discussions that can lead to a buyout, Wedbush notes that such transaction would illustrate the value in Salesforce’s partner ecosystem.
According to Wedbush, Salesforce’s partner network is not only expanding, but the partners continue to build applications that run natively in Salesforce environments.
Given the various positive developments it has noted in Salesforce.com, Inc. (NYSE:CRM), Wedbush believes that the stock deserves a target price hike and rating upgrade, thus the new Outperform rating and $96 price target.
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