Current IQ consensus stands at EPS of $0.19 on revenue of $1.79 bln.

The stock hit a all time high of $82.90 the day after its strong Q3 report has slowly broken below key technical support levels. After entering 2016 at $77 the stock saw steady selling until it fell to $66.

The stock was not spared following (DATA) saying that it was seeing a slow down in the cloud space. This sent the entire group into a tailspin as valuation has always been a concern. CRM would freefall to $52.60 before finally finding support and bouncing back. The stock has been able to push back to the $61 area ahead of tonight's report.

With a Forward P/E still at approx 65x, it will have to impress participants to avoid any further pressure.

Key Metrics

  • Revenue Growth- Q4 Capital IQ consensus is $1.79 bln which is an approx 24% growth; Q3 saw 24% growth.

  • Billings- Expected to increase 21% y/y to approx $3.1 bln.

  • Deferred Revenue- Expected to increase 24% y/y to approx $4.1 bgln. Q3 Deferred Revenue was $2.85 bln, +28% y/y. Unbilled deferred revenue was $6.7 bln, +24% y/y.

Guidance

  • Q4 FY16 Guidance
    • Revenue is projected to be approximately $1.782-1.792 bln (+23-24% y/y), Capital IQ consensus $1.79 bln.
    • Non-GAAP EPS is expected to be in the range of $0.18-0.19, Capital IQ consensus $0.19.
    • Deferred revenue growth is projected to be approximately 23-24% y/y.
  • FY17 Guidance
    • Revenue for the company's full fiscal year 2017 is projected to be ~$8.0 billion to $8.1 billion (+20-22% y/y), Capital IQ consensus $8.08 bln.
    • CRM will provide its expectations for FY17 GAAP EPS, non-GAAP EPS, and operating cash flow tonight.

Q3 Recap

CRM reported Q3 (Oct) earnings of $0.21 per share, $0.02 better than the Capital IQ Consensus of $0.19. Revenues rose 23.7% year/year to $1.71 bln vs the $1.7 bln Capital IQ Consensus.

  • Cash generated from operations for the third quarter was $118 million, a decrease of 4% y/y.

  • Deferred revenue on the balance sheet as of October 31, 2015 was $2.85 billion, an increase of 28% y/y.
  • Unbilled deferred revenue, representing business that is contracted but unbilled and off balance sheet, ended the quarter at approximately $6.7 billion, up 24% y/y.
  • CRM expanded non-GAAP operating margin by 221 basis points.
  • Guidance
    • Co issues guidance for Q4, seeing EPS of 0.18-0.19, excluding non-recurring items, vs. $0.19 Capital IQ Consensus Estimate. CRM projected Q4 revs of $1.782-1.792 bln vs. $1.78 bln Capital IQ Consensus Estimate.
    • Co raised guidance for FY16, seeing EPS of $0.74-0.75 (Prior $0.70-0.72), excluding non-recurring items, vs. $0.73 Capital IQ Consensus Estimate. Co expected FY16 revs of $6.64-6.65 bln (Prior $6.000-6.625 bln) vs. $6.62 bln Capital IQ Consensus Estimate.
    • Co issued upside guidance for FY17, sees FY17 revs of $8.0-8.1 bln vs. $7.99 bln Capital IQ Consensus Estimate.

*DATA SOURCE: BRIEFING*

BIAS: Slightly Bullish

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