Shares of Salesforce.com (CRM) are up $6.39, or almost 6%, at $114.09 following a report this morning by Morgan Stanley‘s Adam Holt, who reiterates an Overweight rating on the shares, writing that in the fiscal Q4 that ends this month the company may see improvement on several fronts, based on his conversation with the company’s CFO, Graham Smith.
One positive area is that the “annual contract value” of deals appears still to be tracking the growth in the sales team, which is expanding at Salesforce:
CRM�s new business growth has historically tracked sales headcount growth and mgmt. suggested this has not changed. Our proprietary job tracker points to 40%+ total head count growth YTD and a similar level of sales growth, while Q4 hiring could reach record levels. If the relationship with new orders is consistent, we should see ACV growing 35%+ if they disclose it, while off balance sheet backlog should be at or above $2B.
And Holt also sees a possible pick up in the speed of billings growth for the company may be picking up speed
Billings, the amount of money received by Salesforce.com in advance of revenue being recognized on the income statement, is the main component of deferred revenue, a measure of how much of future sales the company has “in the bag.” Multiple analysts have worried that the figure is slowing precipitously, such as, for example, Cowen & Co.�s Peter Goldmacher, who on December 12th cut his rating on Salesforce shares to Underperform. The jump in deferred revenue has historically been largest for Salesforce in its December quarter. For example, last January, deferred revenue rose 35% from the prior quarter.
Holt doesn’t go into much detail on billings, except to say that he sees it picking up.
Holt has a $150 price target on Salesforce shares.
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