Tallahassee, FL 2/24/12 (StreetBeat) -- Shares of Salesforce.com (NYSE: CRM) are up $11.20, or almost 9%, at $142.97 after the company last night beat fiscal Q4 estimates, forecast this quarter’s revenue ahead of consensus, and raised its outlook for the year.Price targets are going up pretty much all around, even though the average EPS estimate for this year is in many cases declining to meet the company’s below-consensus earnings forecast.
The average estimate for this year’s revenue has risen from $2.91 billion yesterday to $2.95 billion today, while the consensus EPS estimate slipped to $1.62 from $1.63 yesterday.
There was one upgrade, that I can see, from ThinkEquity’s Brian Schwartz, who raised his rating from Hold to Buy.
Schwartz lists four factors that are encouraging, namely that “competitor distractions (via recent-acquisitions) are accentuating CRM’s disruptive market-positioning, leading to larger, multi-element deals,” that the company is “moderating the expense structure,” the company’s addressable market is expanding, and the company has “an attractive 6 to 12-month window to accelerate share-gains as the larger ERPs play catch-up with their Cloud strategies.”
The real discussion this morning, however, has been not about revenue and EPS but, as is often the case with Salesforce, about the other metrics on which it is judged — bookings, deferred revenue, etc.
On that score, the bulls are exultant.
Citigroup’s Walter Pritchard reiterated a Buy rating and raised his price target to $163 from $152, while cutting his EPS estimate for this year to $1.73 per share in profit from a prior $1.92, even though he thinks the outlook the company offered is likely “conservative.”
Billings, while helped by a favorable shift away from quarterly to annual billing and several big pre-payments, grew 35%, above our 34% estimate and above consensus of 32%. 2) Off-balance-sheet backlog grew by 47% to $2.2B, a figure that points to very healthy growth despite invoicing shifts that hurt this metric (more upfront invoicing reduces backlog). Contract lengths were steady, implying that invoicing pull-forwards is not mortgaging top line in future periods. 3) Deferred commissions – we estimate the cash commissions paid out for new bookings grew 43% Y/Y, the fourth consecutive quarter of acceleration.
Robert Breza of RBC Capital reiterated an Outperform rating and raised his price target to $175 from $160. Breza’s EPS estimate for this year goes to $1.59 from a $1.60 previously.
The company is benefiting in a big way from social enterprise and broader solution sales that are leading to larger deal sizes as evidenced by 100 seven-figure deals (4x last year) and nine eight-figure deals in the quarter. The momentum should continue into Q1 as the company has already signed its first ever nine-figure deal and the pipeline remains at record levels […] Management also noted that it will be disclosing the off balance sheet figure [of total booked business] quarterly going forward, which should bring more transparency to this metric.
It’s hard to find too many cautious statements this morning, but Mark Moerdler of Bernstein Research, who appeared on CNBC a short while ago, gives it the old college try. He maintains an Underperform rating on the shares, though he raised his price target to $91 from $89, and raised his 2012 EPS estimate to $1.36 from $1.28.
Despite the headline beat, “after further analysis, we believe the story may not be as rosy as it seems,” he writes.
Deferred revenue was $1,380 Million compared to StreetAccount consensus of $1,210 Million and our estimate of $1,229 Million, and benefited from a tailwind of $155 Million due to longer invoice duration (move to annual) and a single multi-year deal which was billed in advance […] We stress that deferred revenue, bookings and backlog are not good indicators for future revenue growth, as these metrics are affected by numerous factors such as invoice duration and billing cycles. This is especially true this quarter as much of the increase stemmed from the move to annual invoicing and the billing of a large, multi-year deal. In fact, we believe the uptick in the backlog figure is just a result of the normal course of business. In Exhibit 7, we show that much of the uptick could be explained by the revenue increase in the past few quarters.
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