Salesforce.com, Inc. (CRM) , the San Francisco-based cloud giant, can't do enough to please the market.
Shares slid 1.8% after market close, the day after the company reported top and bottom line beats for the July quarter.
The company reported $3.3 billion in revenues in the second quarter, 27% increase from a year before. Subscription/support and revenues from professional services grew as well, 28% and 14% respectively.
So why the stock slump?
Despite beating analyst expectations on revenue, the company's future earnings guidance of 49 to 50 earnings per share fell short of the anticipated 54 cents per share.
"Salesforce posted what we consider to be a largely in-line or even modestly disappointing print, which was a bit complex to interpret given FX shifts and the inclusion of recently-acquired MuleSoft," said Karl Keirsead, research analyst at Deutsche Bank Research in a note on Thursday. "Despite the revs beat, billings of $2.96 billion were $76 million short of our $3.04 billion estimate."
Deutsche has a buy rating and a price target of $170 per share and cited "slowing DR/billings growth" and "high market penetration" among the risks.
Buying Pullback
Not everyone is concerned about the company's outlook.
Credit Suisse Group AG (CS) research analyst Brad Zelnick told Real Money that the conservative guidance that has the market reacting merely sets the company up for a third quarter earnings beat.
"They guided the third quarter down a bit, but they guided the fourth quarter up," he added, noting that the stock's move was not indicative of long term opportunity.
Further, he explained that the billings numbers are not indicative of company performance as each analyst can formulate their calculations of the billings numbers differently.
He instead pointed to current bookings growth of 26% year over year as a more reliable metric.
As such, he reiterated an outperform rating and gave the stock a price target of $170.
His retort to the stock slide was echoed in a note by senior research analyst at Piper Jaffray Alex Zukin, who declared the weakness in the stock to be a buying opportunity.
"Salesforce posted a solid start to the year, with all metrics coming in ahead of consensus
in spite of meaningful FX headwinds during the quarter," he wrote in a note on Thursday. "We would be buying this pullback as we see near-term catalysts from Dreamforce/Analyst Day, strong federal budget flush in 3Q and the best IT spending environment in history coupled with a renewed executive focus on operational excellence & execution setting up significant 2H outperformance."
As a result, he raised his price target from to $180, taking no heed of the stock slide this morning.
Jim Cramer's AAP Alerts team was not concerned about the shares decline post-earnings either and pointed to profit-takers dumping shares of the stock after a spate of gains in the past month as a possible stock depressant.
"Overall, we say don't be fooled by the stock dipping after-hours because of profit-takers selling the stock's 13% run since the beginning of August and 7% gain in the last 10 days," the team concluded.
Year to date, the company's share price has increased over 50%, adding to selling incentive for profit takers.
As the company has shown in the past, tripling its value in less than five years, Salesforce can put up a fight and tackle risks.
