May 03, 2012 at 11:02 AM EDT
Credit Suisse Says Buy Salesforce.com, 16%+ Upside
Salesforce.com (CRM) was recently rising 2.1% on an upgrade from Credit Suisse. This morning analyst Philip Winslow raised his rating on the stock from Neutral to Outperform, and boosted his target price by $40 to $185. Winslow wrote that the move was due to his belief that the company is experiencing the most revolutionary changes [...]

Salesforce.com (CRM) was recently rising 2.1% on an upgrade from Credit Suisse.

This morning analyst Philip Winslow raised his rating on the stock from Neutral to Outperform, and boosted his target price by $40 to $185.

Winslow wrote that the move was due to his belief that the company is experiencing the most revolutionary changes of all its peers, “driven by the six primary technology foundations of the fourth-generation architecture: (1) SOA, (2) cloud, (3) Fast Data (i.e., in-memory), (4) Big Data, (5) social, and (6) mobile.”

In the next three to five years, he sees Salesforce.com offering the greatest incremental revenue growth opportunity among software vendors, “propelled by replacement and expansion cycles across B2B and B2C implementations…We view Salesforce.com as the company in our coverage universe most leveraged to this massive technology refresh and expansion cycle across the CRM market (as well as the emerging, high-growth social enterprise and platform-as-a-service markets).”

Moreover, he sees value in customization: “Specifically, 40% of CRM applications were custom built in 2011 as compared with 85% in 2002 and 70% in 2007. We believe that this fourth generation of modernization will accelerate the secular shift from custom-built to packaged applications, and we therefore expect Salesforce.com to benefit from upgrades not only to legacy commercially developed but also to custom-built applications, adding another layer of growth to this wave of software investment.”

Winslow’s $185 price target represents more than 16% upside from yesterday’s close, and while the company trades at a premium (144.1% to the sector), he has “forecast Salesforce.com’s revenue growth rate to be 175.8% higher than our coverage universe over the next five years.”

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