FBN: Salesforce.com Deferred Revenue Offers 'Visibility'

November 19, 2014

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Salesforce.com, Inc. (NYSE: CRM) shares fell Thursday on a disappointing outlook but an analyst said the company's 28 percent increase offers a clear look at its potential.

The San Francisco-based marketing services company traded recently at $59.07, down 3 percent.

FBN's Shebly Seyrafi, who maintained an Outperform rating and $75 target Thursday, advised investors to "buy on any pull back."

Deferred and unbilled deferred revenue of $7.6 billion as of October 31 grew 28 percent from a year earlier and equals about 123 percent of total estimated revenue for the next four quarters, according to Seyrafi.

Moreover, Seyrafi said that during the recent quarter, Salesforce.com doubled the number of deals it signed worth more than $1 million, from the same period a year earlier.

The company is spending heavily to open new data centers in France and Germany. Its first European data center, in the U.K., opened last month.

Adding centers overseas will "drive continued strong international growth," according to Seyrafi, and address customer concerns about having sensitive business data housed in the U.S. "post Snowden/NSA."

Although the spending will hurt gross margins in 2015, Seyrafi said operating margins will continue to widen on "cost efficiencies."

Late Wednesday, the company forecast fourth-quarter 2014 adjusted earnings of $0.13 to $0.14 per share, on revenue of $1.436 billion to $1.441 billion, vs. analysts' expectation of $0.15, on revenue of $1.45 billion.

Editor's note: A previous version of this story said Salesforce.com was based in Seattle.