Tag Archives: sap

Will Salesforce.com Help End Enterprise Software’s ‘Beatdown’?

More than most, Salesforce.com’s fourth-quarter earnings — scheduled for release after the market close Wednesday — could help bring an end to what one analyst calls “the beatdown that growth software stocks endured for about 45 days.” “We believe that last week probably marked a bottom, or close to a bottom” for software companies that “are down about 25% for the average stock,” wrote Canaccord Genuity analyst Richard Davis in a research note Sunday. “Deals are getting a bit more scrutiny than before, but we believe we are nowhere near anything that looks like an IT spending clampdown. We are broadly optimistic on the outlook for next-generation software companies.” Salesforce ( CRM ) stock hit a 16-month low at 52.60 on Feb. 8, then rose 22% through Monday’s close at 63.98. Salesforce stock was down a fraction, near 63.50, in afternoon trading in the stock market today . That’s 23% off the stock’s all-time high of 82.90, hit Nov. 19, after Salesforce reported fiscal-third-quarter earnings up 50%. Salesforce is a cloud software pioneer and the No. 1 maker of customer relationship management software. Salesforce is coming off many years of double-digit revenue growth and seven consecutive quarters of double- or triple-digit earnings-per-share gains, year over year. Its market cap at $42 billion makes it half the size of SAP ( SAP ), the largest in IBD’s Computer Software-Enterprise industry group, and much smaller than business software giant Oracle ( ORCL ), with its $154.7 billion market cap. But Salesforce is much larger than next-generation cloud software companies  Workday ( WDAY ), ServiceNow ( NOW ), Ultimate Software ( ULTI ) and others. Salesforce’s fiscal Q4 2016, which ended in January, should make it eight consecutive quarters of double-digit-or-better earnings growth. Analysts polled by Thomson Reuters expect Salesforce to report earnings up 36% to 19 cents per share minus items, on revenue up 24% to $1.79 billion. Salesforce had guided Q4 to adjusted EPS of 18 to 19 cents on sales up 24% at the midpoint. Earnings especially were a tough comparison to follow, as EPS had doubled to 14 cents in fiscal Q4 of 2015. For the current Q1 2017 ending in April, Wall Street models EPS up 31% to 21 cents ex items, on revenue up 23% to $1.861 billion. Salesforce CEO Marc Benioff said at the Q3 analyst conference: “We expect to deliver our first $8 billion year during our fiscal year 2017, which puts us well on the path to reach $10 billion faster than any other enterprise software company.” The company’s Salesforce1 platform for mobile-application development should spark growth, RBC Capital Markets analyst Ross MacMillan said in a research note Sunday, although “there are many avenues to sustain growth, including service and marketing, the platform, and international and future initiatives. “While deceleration is inevitable, we think Salesforce can continue to drive premium growth for its size, and it remains an important strategic asset.” RBC maintains an outperform rating on Salesforce.com stock, with an 80 price target, as “one of the best positioned companies in large-cap software.”

Tableau Might Prove Canary In Coal Mine For Broad Software Sector

Well, which canary is it? After Big Data analytics software maker Tableau Software ( DATA ) disappointed investors with Q1 and 2016 guidance  well below Wall Street expectations  — sending its stock crashing 49.5% Friday to an all-time low — Summit Research analyst Srini Nandury questioned whether Tableau “will prove to be the proverbial canary in the coal mine.” Nandury was referring to Tableau and prospects for its growth. But later Friday, in a research report, Robert W. Baird analyst Steven Ashley posed the identical question: “We wonder if Tableau will prove to be the proverbial canary in the coal mine.” Ashley’s canary was much bigger. “With among the smallest deal sizes and shortest sales cycles in enterprise software, Tableau theoretically would be the first to see any downturn in new pipeline business due to a macro weakness,” Ashley wrote, questioning whether other enterprise software vendors might follow. Investors got the point. Tableau rivals Splunk ( SPLK ) and  Qlik Technologies ( QLIK ) fell 23% and 15%, respectively, and little Hortonworks ( HDP ) — which may have been Big Data’s first canary with a 37% gap down Jan. 19 after a poor earnings report — fell 17%, also hitting an all-time low. Hortonworks The First Canary? Closing Friday at 8.48, Hortonworks is not only below its December 2014 initial public offering price of 16, but is also below the 9.50-a-share price Goldman Sachs set Tuesday for an 8.425 million-share secondary offering. Hortonworks’ Jan. 19 dive came after it filed with the SEC to raise $100 million in the secondary offering, coming after the worst opening two weeks of any year in the market’s history. On Tuesday, Hortonworks said in its new SEC filing that it had  raised only $77.19 million, before expenses. Evercore ISI analyst Bill Whyman told IBD on Friday, however, that he stands by his research issued Jan. 26, in which he acknowledged tech companies face continuing “weak” demand, but not so weak that stocks should be “falling off a cliff” like they have so far this year. “The harder question is: Are stocks anticipating that demand will fall off a cliff six months from now?” Whyman said. “The evidence to date does not make this our base case.” He expects 6% global tech revenue growth for 2016 vs. 2% in 2015, and offered a mixed bag when looking at sectors. He advises overweighting portfolios with software and Internet stocks, underweighting communications equipment and computing, and market-weighting (neither buying nor selling) semiconductor stocks. “We forecast ‘not-pretty-but-we’ll-take-it’ overall,” he said. Late Friday, however, his Evercore ISI colleague Kirk Materne, sang a tougher mine-canary tune, “as software officially enters the pain cave.” “If you wanted a cathartic event to wipe out any remaining optimism in the software space, (Tableau’s) earnings report was it,” Materne wrote in a research note. “Ironically, the idea that a license-based, visualization tool vendor (Tableau) that is facing growing pains would cause a 10% pullback in Adobe ( ADBE ) or 14% pullback in CRM ( Salesforce.com ( CRM )) would seem like a stretch, but welcome to the new reality. “While most of the major ‘blow-ups’ year-to-date in software have been more company specific (at least in my view) vs. a dramatic change in the fundamental backdrop, the reality is no one cares, and the broader de-risking in the sector is unlikely to end until we see a strong quarter from one of the higher-quality growth names like CRM or Palo Alto Networks ( PANW ) (and the stock actually goes up) and/or until some of the smaller names throw in the towel and M&A picks up.” Palo Alto Networks stock fell 12% Friday, part of the general downturn. Database leader  Oracle ( ORCL ), which is still trying to accelerate its cloud business, fell 1.9% Friday, in line with Friday’s broader market decline. IBD’s entire Computer Software-Database industry group fell 15%. Other big names in the enterprise software market tumbling Friday included  SAP ( SAP ) (down 3.6%), Salesforce.com (13%), Workday ( WDAY ) (16%) and Manhattan Associates ( MANH ) (9%). IBD’s Computer Software-Enterprise group fell 8% Friday to a 2-1/2-year low. Qlik, CyberArk Software ( CYBR ), FireEye ( FEYE ) and Hortonworks are all scheduled to report earnings in the coming week, with the pressure on.

Manhattan Associates Slips Despite Q4 Earnings, 2016 Guidance Beat

Maker of supply-chain management software Manhattan Associates ( MANH ) on late Tuesday posted Q4 earnings that beat expectations. Fourth-quarter earnings rose 32% to 39 cents a share minus items, beating Wall Street analysts by 4 cents, on revenue up 8% to $141.4 million, or $100,000 better than Wall Street. It also guided 2016 beyond Wall Street expectations. Still, Manhattan Associates stock seesawed Wednesday and was flat in late-afternoon trading in the stock market today , near 55. Shares touched a record high 77.75 on Dec. 7. Analysts, though, were mostly upbeat. “Manhattan closed 2015 strong,” said William Blair analyst Matthew Pfau in a research note Wednesday. The company’s enterprise platform lets a warehouse manager 100 miles away see which Harry’s Apothecary goods are flying off the shelves and lets Harry know what’s stacking up at the warehouse, helping him prepare for the next sale. The visualization can extend from the checkout counter to the manufacturer’s parts supplier. With a market value of $3.77 billion, Manhattan is the eighth largest member of IBD’s Computer Software-Enterprise industry group. It earns an IBD Composite Rating of 87, meaning its stock is outperforming 87% of all S&P 500 companies, and ranks higher than most larger rivals, including SAP ( SAP ), Salesforce.com ( CRM ), ADP ( ADP ), Workday ( WDAY ), ServiceNow ( NOW ) and NetSuite ( N ). Only Ultimate Software ( ULTI, ) with a 98 CR, is bigger and performing better. The stock of the largest, SAP, with a market cap of $94 billion, spent most of the morning down before rising up a fraction Wednesday afternoon. Ultimate Software stock was up 6%, after that company also beat earnings expectations late Tuesday. “Although the retail environment remains challenging, Manhattan has not seen a material change in IT purchasing trends from retailers and the pipeline is still strong,” Pfau said. “However, we believe that management’s guidance takes into account a cautious retail IT spending environment for 2016.” While consumer spending makes retailers cautious, Manhattan’s supply-chain tools are intended to make the shopkeepers more cost-efficient. “Demand for our omni-channel, store and distribution management solutions continues to be strong and we’re working hard to extend our market leadership position,” Manhattan Associates CEO Eddie Capel said in the company’s earnings release.  “Despite persistent global macro sluggishness, we are optimistic about our growth opportunities in 2016. We will continue to be a serial investor in innovation. . . .” For the year, Manhattan expects adjusted EPS to rise 11%-13% at $1.69-$1.72 per share, on revenue up 9%-10.5% to $609 million to $615 million, or $612 million at the midpoint. Analysts polled by Thomson Reuters have modeled $1.66 and $611.6 million.