Salesforce Benefiting From Compounding Effect As Profitability Finally Following Top-Line

Raimo Lenschow of Barclays reaffirmed his Overweight rating on salesforce.com, inc. CRM following strong quarterly results, driven by healthy 31 percent billings growth.

But, investors are concerned with guidance of just about 7 percent billings growth for the first quarter, when the company faces tough comps.

Related Link: Salesforce Still Best Positioned At The Top Of The Cloud

That said, Lenschow believes the underlying fundamentals remain unchanged and growth will return to its normal trajectory following the first quarter.

“In this respect, we would use any weakness as a buying opportunity as Salesforce continues to grow healthy at scale and is now also starting to deliver better margins and cash flow,” Lenschow wrote in a note.

The analyst is also pleased with the fact that margins and cash are starting to follow solid topline, representing a compounding effect. The company’s guidance is looking for 125-150bp margin increase.

“We think CRM is truly a unique asset in the industry, the company has reached a scale that creates a huge barrier of entry for large enterprise players like Oracle and SAP. This is something that next generation vendors like Workday Inc WDAY have not yet achieved,” Lenschow added.

At last check, shares of Salesforce rose 2.88 percent to $83.69. The analyst has a price target of $89.