Salesforce Remains One Of The Best Positioned Companies In Enterprise Software

Goldman Sachs said in a note released on Friday that salesforce.com, inc. (NYSE: CRM) is one of the best positioned companies in the enterprise software segment, with multiple growth vectors.

Stellar Q3 Showing, Q4 Guidance

Analyst Heather Bellini reviewed the company's quarterly results, which revealed above-consensus revenues, which rose 25 percent year-over-year. Non-GAAP earnings of $0.24 also exceeded estimates and billings, which atypically fell short of estimates in the second quarter, rose 19 percent to $1.82 billion, also exceeding the consensus estimate. Cash flow was also above estimates, the analyst noted.

Goldman also noted the company's fourth-quarter non-GAAP earnings per share guidance was lukewarm ($0.24–$0.25 versus $0.25 consensus estimate), but deferred revenue guidance was above Street forecasts.

Strong Large Deal Wins

Going by the third-quarter outperformance, the firm said it believes the underwhelming showing in the second quarter was a blip on the radar. Management has indicated strong performance in large deals, with a record number of seven-figure deals and two large deals with Citigroup Inc (NYSE: C) and PNC Financial Services Group Inc (NYSE: PNC), the firm noted. As such, Goldman estimates fourth-quarter billings growth to accelerate 400 basis points to 24 percent.

Reiterating Ratings, Price Target

Goldman reiterated its Conviction List Buy rating on the shares of salesforce.com, as it believes sentiment has ticked down over the past few months, going by the significant increase in short interest. The firm's 12-month price target of $96 is based on its DCF, EV/billings and EV/FCF analysis.

In pre-market trading, shares of salesforce.com were up 6.05 percent at $79.74. At last check before publication, shares were up 4.43 percent at $78.52.

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