SalesForce.com, Inc. (NYSE:CRM): RiverPark Is Crazy About It

RiverPark Large Growth Fund is bullish on SalesForce.com, Inc. (NYSE:CRM), a $98.33-billion market cap customer relationship management software provider. In its Q1 Investor Letter, RiverPark discussed its thesis on CRM. Let’s take a look at the fund’s comments.

Salesforce.com is also a software vendor that, like Oracle, sells Customer Relationship Management (CRM) software. Unlike Oracle, however, CRM was created as a subscription offering from inception and was one of the main pioneers of the software-as-a-service (SaaS) business model. The cloud computing/SaaS movement is now a $100 billion global market and CRM is now one of the fastest-growing large-cap software companies in the world.

CRM has consistently grown revenue at greater than 20% each year since its founding in 1999 to more than $10 billion in sales last year. We believe that through price increases and new products to cross-sell to its large customer base, Salesforce can continue to drive greater than 20% annual revenue growth for the long-term. In fact, following a 48% increase in the company’s backlog in its most recent quarter, Marc Benioff, the company’s CEO, said he’d “never seen a demand environment like this,” as companies accelerate their investments around digital transformation initiatives, which plays squarely into Salesforce’s strengths.

Most importantly to us, after years of profitless pursuit of top-line growth, a combination of operating leverage and recent cost discipline has resulted in 15% operating margins (and a greater than 60% growth in free cash flow) that we believe are poised to expand significantly. We believe the company’s ongoing growth and cost initiatives pave the way to 20%-25% operating margins over the next four years and greater than 30% longer term. Although CRM has been a strong stock during its transition to strong profit growth, we believe that a period of rapidly expanding profit and free cash flow growth will support continued outperformance of the company’s shares in the years to come.

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SalesForce.com, Inc. (NYSE:CRM) is a popular stock among hedge funds covered by Insider Monkey. As of the end of 2017, there were 72 funds in our database with positions in the company including Tybourne Capital Management, Sachem Head Capital, and Duquesne Capital.

On Monday, CRM closed at $133.98. The stock jumped 55.47% over the past 12 months, while its year-to-date performance increased 28.32%. Over the past six months, CRM gained 29.24%. The stock has a consensus average recommendation of ‘Buy’ and a consensus average target price of $149.26, according to analysts polled by FactSet.