Arik Hesseldahl

Recent Posts by Arik Hesseldahl

After Q2 Results, Everyone Likes Salesforce Again

It looks like shares of are going to open higher this morning. In premarket trading today, they spiked by more than three dollars, or more than eight percent, to $47.26 as of 8:45 am ET.

The movement comes in the wake of yesterday’s second-quarter earnings results, which were substantially better than expected, and a nice surprise after last quarter’s disappointing results. The company revised its revenue outlook for the 2014 fiscal year slightly upward. Going forward, Salesforce is expected to be a billion-dollar-a-quarter business by revenue, which is interesting, when you consider that it was only a few years ago that it recorded its first billion-dollar year.

Sanjay Poonen, a former SAP executive now working for VMware, observed the growth trend in a tweet that was later retweeted by Salesforce CEO Marc Benioff:

So, revenue milestones aside, how did Salesforce do? Ask the analysts. Many boosted their share prices and ratings on Salesforce today. Credit Suisse raised its price target to $60 from $52.50. UBS raised its target to $55 from $50. Piper Jaffray called Salesforce an “unparalleled growth and thought leader.”

One thing that helped Salesforce beat expectations so soundly was its acquisition of ExactTarget, the email marketing firm for which Salesforce paid $2.5 billion in June. As Brad Reback, an analyst with Stifel, observed in a note to clients today, closing the ExactTarget deal added $16 million in revenue and $44 million to the all-important deferred revenue lines. “However, even when excluding the acquired contribution, the company’s results were still very strong, in our view,” he writes. Take out ExactTarget’s contribution to deferred revenue — money from customers that is committed but not yet paid — and adjust for the currency effects (mainly the Japanese yen), and Salesforce’s bookings grew by a healthy 32 percent.

The company also announced some key customer wins, including restaurant-supply giant Sysco (not to be confused with the networking giant Cisco Systems), where it was tied with existing key business applications from the German software giant SAP. Reback called this an example of Salesforce “unleashing the dragon.” Other wins announced during last night’s conference call included fashion house Louis Vuitton, publishing company Pearson, insurance giant AIG and pharmaceutical company Johnson & Johnson.

Reback raised his target price on Salesforce shares to $60, arguing that that valuation is a little more than seven times its projected enterprise value in its 2015 fiscal year.

Also, Salesforce CEO Marc Benioff appeared on CNBC’s “Mad Money with Jim Cramer” last night, as he does every quarter (only this time by phone). As usual, Cramer, who readily admits to being a fan of the company, teed up a batch of relatively softball questions. But the fact is that Salesforce is growing. During the interview, Benioff set his sights on his next milestone: $10 billion in revenue:

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