Salesforce.com (CRM) reported decent third quarter 2012 results. The earnings guidance is also decent, but cost increase may offset revenue growth to a certain extent. We are concerned about continuous R&D investments that would rationalize margins to some extent.
We find Chatter a key driver of Salesforce.com’s enterprise license agreements. We, however, caution investors about strong competition in CRM application and cloud-computing areas. Google and Microsoft are worthy of special mention, since they have been fighting to win government clients at local, state and federal levels to use their online e-mail and other applications that fit into the cloud-computing space.
Currently, we have an Underperform rating on the stock and set a six-month target price of $108.00. This implies a downside risk of 8.7% from the current level.
