Salesforce Inc. shares rose. Up 85% over the past 12 months, but Morgan Stanley sees plenty of juice left in their rally.
Analyst Keith Weiss rated the stock his top pick on Monday, reiterating his view that Salesforce CRM,
It has the potential to rise by 25%.
Last year's performance was “driven mostly by a significant move higher in Salesforce's profitability profile, with limited multiple expansion,” Weiss wrote. However, this year investors could take a more optimistic look at the company's long-term revenue growth potential and Salesforce's place in the world of artificial intelligence.
The potential for Wall Street sentiment to shift based on these two factors “offers an opportunity
“A clear catalytic path to bring multi-CRMs back in line with peers on a growth rate basis,” he wrote. Salesforce shares currently trade at a roughly 57% discount to Microsoft Corp. shares, Weiss noted. MSFT,
Adobe Inc.ADBE,
Intuit Intu, Inc.
Based on growth-adjusted earnings. These three names saw good stock rises last year as well, but their rise largely came on the heels of multiple expansion.
See also: Salesforce stock led the Dow Jones last year. Why could there be more gains in store?
Moreover, while Salesforce's forward earnings estimates have risen by nearly two-thirds over the past 12 months, the stock's forward price-to-earnings multiple has only risen by low double digits over the same period.
“From this perspective, we see strong support for our view of CRM having the best risk reward in large-cap programs, given recent stock price performance driven more by improvements in company fundamentals than ‘animal instincts,’” Weiss wrote.
He continues to rate the stock as Outperform with a price target of $350.
