Wunderlich Initiates Salesforce At Buy, Says 'The Force Will Be With You'

In a report published Tuesday, Wunderlich analyst Rob Breza initiated coverage of salesforce.com, inc. (NYSE: CRM) with a Buy rating and $85 price target. The company offers the unique advantage of a subscription/delivery platform combined with unbilled and billed backlog visibility.

While expressing optimism regarding the company's long-term growth prospects, the analyst reported that Salesforce has reported operating margin expansion for the fourth successive quarter. The management expects to deliver operating margin in the mid-30 percent range in the long term.

"From its core sales cloud franchise to its recently introduced analytics, community, and marketing clouds, the company's total addressable market (TAM) for all of its cloud offerings currently totals $62B according to independent third-party researchers, and this TAM is expected to grow at a CAGR of 11 percent to $82B in CY18, which we believe is conservative," Breza said.

Apart from benefits like automatic cloud service updates, cloud-based solutions also entail lower total cost of ownership, as compared to the traditional on-premises software. In addition, shifting to the cloud also offers the potential to expand one's customer base to include clients of all sizes for solutions that had so far been accessible only to the larger, more sophisticated IT professionals.

According to the Wunderlich report, "Salesforce.com's multi-tenancy architecture underpins its multiple service offering. This includes Sales, Service, Marketing, Community, Analytics, and its development platform, creating a unique and unmatched customer success platform."