salesforce.com's (CRM 1.33%) recent earnings report didn't blow past analyst estimates. Based on the reaction of after-hours traders driving its stock price up nearly 13%, meeting expectations was more than adequate -- and Salesforce did exactly that. But such an impressive buying spree, which pushed Salesforce's stock price up to consensus analyst targets of $70 a share, begs the question: is there still room for growth?
There are a few key initiatives Salesforce either has in place, or is considering, that could give it the impetus it needs to keep the ball rolling. Of course, the question will be whether or not CEO Marc Benioff and team can execute on these strategic areas.
A quick recap
Salesforce's recently completed fiscal 2015 Q4 results were virtually identical to the forecast it announced at the end of the third quarter. Salesforce ended its fiscal year by generating $1.44 billion in quarterly revenue, a solid 26% improvement from the prior year and precisely what it had expected.
As Benioff pointed out numerous times during the earnings call, fiscal 2015 ended with Salesforce becoming "the fastest enterprise software company to $5 billion in revenues." The $5.37 billion in sales for the year was a 32% increase from fiscal 2014, as was Salesforce's $3.32 billion in deferred revenue.
The negative ($0.10) Q4 earnings-per-share on a GAAP (including one-time items) basis was also spot on with Salesforce estimates, as was the non-GAAP $0.14 per share. Perhaps as positive as Salesforce's financial results was the news that it is raising guidance for this fiscal year to a whopping $6.475 billion to $6.52 billion in revenue. Yet another year of 20%-plus sales growth would certainly be impressive.
It's all about the data
As usual, there was no shortage of hyperbole during Salesforce's earnings call -- that's par for the course. However, it was clear that when Benioff and Hawkins discussed the relatively new analytic cloud solution powered by Wave technology, the excitement wasn't feigned. Business intelligence, in conjunction with big data in the cloud, is a natural solution for Salesforce's existing lineup of products.
Salesforce customers are continually inputting and updating data, so the development of a solution that collates, analyzes, and provides actionable results is a natural. And, according to Salesforce, its customers are tripping over themselves to get onboard. Though specific revenue figures weren't shared, Benioff said analytics cloud is the fastest-starting product Salesforce has ever introduced. And Hawkins alluded to a focus on "multi-million dollar deals." If Salesforce can keep the analytics cloud momentum going, its fiscal 2016 could get a real boost.
More partners, more solutions
In addition to analytics cloud, it was reassuring to hear that Salesforce intends to continue bolstering its solution suite, both with pending "announcements of new products" and by continuing to explore strategic partnerships, as it did recently with Microsoft (MSFT 3.23%). The Microsoft arrangement is a microcosm of the kind of partnerships Salesforce should continue to pursue. The two industry behemoths agreed to offer each other's integrated solutions via their own services.
For Salesforce, it gains access to Microsoft's Office 365 users, it's able to offer its customers additional tools like Excel, and the new solutions are all mobile-ready. There's a reason some of the biggest players in technology are opting to join forces, and the Salesforce-Microsoft partnership is a good example of why. And with more on the horizon, partnerships could play an important role in driving sales.
Going global
Though Salesforce tried to sugarcoat it by alluding to the impact of a strong dollar, the fact remains that its non-U.S. revenue remains relatively small. By quarter's end, 73% of Salesforce's revenue originated in the Americas, up from 72% last year. Sure, that's a challenge, but growing its international revenue is also a great opportunity to fuel growth, and Salesforce is taking steps to do just that.
Salesforce is scheduled to open several new data centers across Europe this year, setting the stage for ramping up European sales. As it stands, Europe now accounts for 18% of total revenue, the same as last year. But with the infrastructure in place and ready to go, Salesforce's challenge to geographically diversify revenue sources could prove to be a boon.
And the aforementioned $70 price target analysts had in place prior to Salesforce's earnings announcement? Several have already bumped it up to $80. Analyst price targets certainly aren't a reason for a stock to rise, but if Salesforce is able to execute in these key areas, $80 a share is a reasonable expectation.
